Unified Payments Interface (UPI) has been the backbone of India’s digital payment revolution for the past several years. What started as a convenient payment method within India has now transcended borders, with UPI adoption spreading to neighbouring countries as well.

As of the first quarter of FY 2025–26, nearly 675 banks are live on UPI, processing over 18 billion transactions per month, with a total transaction value exceeding ₹24 lakh crore. In essence, UPI has transformed the way we make payments, turning digital transactions into an everyday habit for millions of Indians.

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From buying a packet of milk to purchasing daily vegetables or even more significant discretionary items like clothing, electronics and even digital gold – UPI has become a seamless and trusted way to pay. What’s even more remarkable is that UPI isn’t just a favourite among the younger, tech-savvy generation, it has also found acceptance among older users, including baby boomers, who have adapted to this digital mode with ease.

But UPI is no longer just about payments.

In recent years, UPI has evolved into a broader financial ecosystem. One of the most notable developments came in 2023, when the National Payments Corporation of India (NPCI) introduced “Credit on UPI.” This move enabled users not only to make payments digitally from their bank accounts but also to borrow money digitally and use it for payments, all within the UPI framework.

What is credit on UPI?

Credit on UPI can be broadly categorized into two types:

  1. UPI-Linked Short-Term Loans: This facility allows individuals to access small-ticket loans, ranging from a few thousands to up to a lakh rupees, which are credited directly to their bank accounts. These accounts are already linked to their UPI IDs, enabling users to make purchases or transfers using UPI, just like they would with their own funds.
  2. RuPay Credit Cards Linked to UPI: Another channel is the ability to link RuPay credit cards to a UPI ID. This allows users to tap into their credit card limits and make UPI payments using credit. While this is currently limited to RuPay credit cards (Visa and Mastercard are not yet supported), it adds another dimension to how users can access and utilize credit digitally.

However, not all merchants currently support payments through UPI-linked credit cards. The number is growing steadily as more businesses upgrade their infrastructure to accept this form of payment, but coverage is still expanding.

Ease of access vs. financial discipline

While UPI-based credit offerings make borrowing and payments more accessible, they still operate under the traditional principles of lending. Just like a personal loan or a credit card, any form of UPI credit requires the lender to assess the borrower’s creditworthiness. This is typically done using credit bureau reports and credit scores.

Moreover, these credit lines, whether through a RuPay credit card or a UPI-linked short-term loan, are reported to credit bureaus. That means your usage, repayment behaviour, and delinquencies (if any) directly impact your credit report and your credit score.

Why this matters

For many users, the experience of using credit via UPI may feel no different from using their regular bank balance. But it’s crucial to remember: you are borrowing money, not spending your own funds.

This convenience should not come at the cost of financial responsibility. Users must maintain the same discipline with UPI credit as they would with any traditional credit facility. This includes:

  • Borrowing only when necessary
  • Making repayments on time, whether in EMIs or lump sums
  • Understanding the repayment terms clearly
  • Avoiding defaults, which will be reported to credit bureaus

Any delay or missed payment will be flagged as delinquency, negatively impacting your credit score and future borrowing potential. A poor credit score can limit your access to financial products or result in higher interest rates when you apply for loans later.

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Credit on UPI brings a new level of convenience and flexibility to India’s digital payment ecosystem. It simplifies access to short-term credit and integrates it seamlessly into the UPI platform we already use daily. However, with this ease comes the responsibility to manage credit wisely.

As digital credit becomes more integrated into everyday transactions, it’s essential to stay mindful of its implications. UPI may feel like you’re simply transferring money from your bank, but when credit is involved, it’s a loan, complete with reporting, repayment obligations, and long-term financial consequences.

So, while credit on UPI makes life easier, use it consciously and repay it diligently. It’s not just a payment- it’s a financial commitment.

Disclaimer: The information provided in this article is for informational purposes only and does not constitute financial, legal, or professional advice. While every effort has been made to ensure accuracy, readers should verify details independently and consult relevant professionals before making financial decisions. The views expressed are based on current industry trends and regulatory frameworks, which may change over time. Neither the author nor the publisher is responsible for any decisions based on this content.

Ramkumar Gunasekaran, Director Sales, CRIF High Mark