Through which platform can Small Finance Banks offer pre-sanctioned credit lines, as per RBI's December 2024 announcement?

The correct answer is Unified Payments Interface.

Key Points

• Unified Payments Interface (UPI) is a real-time payment system developed by the National Payments Corporation of India (NPCI), facilitating instant fund transfers between two bank accounts.
• In December 2024, the Reserve Bank of India (RBI) announced that Small Finance Banks (SFBs) can offer pre-sanctioned credit lines through UPI.
• The integration of credit lines with UPI enables customers to access pre-approved credit seamlessly for transactions, boosting financial inclusion.
• UPI allows users to link multiple bank accounts through a single mobile application, making it one of the most versatile payment platforms.
• This initiative aligns with the RBI’s goal of enhancing the digital payment ecosystem and making credit more accessible.

Additional Information

• Unified Payments Interface (UPI):
  • Launched in April 2016 by NPCI, UPI is regulated by the Reserve Bank of India.
  • It enables instant money transfers and supports features like QR code-based payments, bill sharing, and recurring payments.
  • UPI has gained global recognition and is being adopted in countries like Singapore and UAE.
• Small Finance Banks (SFBs):
  • SFBs are specialized banks established to provide financial services to underserved sectors like small businesses, farmers, and low-income groups.
  • They are governed by RBI guidelines, ensuring financial inclusion and economic growth.
  • Examples include AU Small Finance Bank and Equitas Small Finance Bank.
• Pre-Sanctioned Credit Lines:
  • A pre-sanctioned credit line refers to a pre-approved loan or credit facility that can be accessed by borrowers instantly.
  • It offers flexibility and convenience for users to utilize funds as needed without repetitive approval processes.
• Digital Payment Ecosystem in India:
  • India has witnessed exponential growth in digital payments with platforms like UPI, NEFT, RTGS, and IMPS.
  • The government and RBI continuously introduce policies to enhance financial inclusion and reduce cash dependency.
  • India is among the leaders in adopting digital payments globally.