UPI achieved 15,547 crore transactions worth Rs 223 lakh crore this year, transforming India’s financial landscape. It is now being accepted in seven countries, furthering financial inclusion and access to digital payments.
The Unified Payments Interface (UPI) has achieved 15,547 crore transactions worth Rs 223 lakh crore from January to November this year, ‘reflecting its transformational impact on financial transactions’ in India, the Finance Ministry said on Saturday.
The Finance Ministry also said that UPI is now accepted in seven countries, including France, UAE, Singapore, Sri Lanka, Mauritius, Bhutan and Nepal. The UPI system provides a cheaper and faster alternative to the available channels of cross-border remittances.
UPI has succeeded in increasing financial inclusion and promoting equitable economic growth by providing access to formal credit for the first time to disadvantaged groups, including sub-prime and new-to-credit borrowers, according to a new study by IIM and ISB professors. The authors said UPI’s success can be replicated in other countries as well and India can play a leading role in helping them adopt fintech systems.
“In a very short span of time, UPI has rapidly expanded the reach of digital payments across India and is used at all levels from street vendors to large shopping malls. Since its launch in 2016, Unified Payments Interface (UPI) has transformed financial access in India, enabling 300 million individuals and 50 million merchants to make seamless digital transactions, according to a study by IIM and ISB professors.
By October 2023, 75 per cent of all retail digital payments in India will be through UPI.
The rapid adoption of UPI was made possible due to affordable internet across the country. A 10 percent increase in UPI transactions led to a 7 percent increase in loan availability, indicating how digital financial history enabled lenders to better evaluate borrowers,” the study said.
Fintech lenders expanded rapidly, increasing their loan volumes, the authors said. 77 times, far ahead of traditional banks in serving small, underserved borrowers. The study also pointed out that despite loan growth, default rates have not decreased.
The increase, indicating that UPI-enabled digital transaction data helped lenders expand responsibly. To ensure greater financial inclusion, the RBI last week decided to allow small finance banks (SFBs) to also extend pre-approved credit lines through UPI.
In September 2023, the scope of Unified Payments Interface (UPI) was expanded by enabling pre-approved credit lines to be linked through UPI and used as a funding account by scheduled commercial banks, but payments banks, small finance banks (SFBs) and regional rural banks were excluded from the scope. “Credit lines on UPI have the potential to provide low-ticket, short-term products to ‘new-to-credit’ customers.
SFBs leverage a high-tech, low-cost model to reach the last-mile customer and can play an enabling role in expanding the reach of credit over UPI,” RBI said. “Therefore, it is proposed to permit SFBs to extend pre-approved credit lines through UPI. Necessary guidelines will be issued shortly,” the RBI statement said.