Key Points
- Enhanced Limits: As of late 2025, users can access credit lines up to ₹1,00,000 for merchant payments and up to ₹10,000 for emergency cash withdrawals.
- Purpose-Based Restrictions: New NPCI mandates ensure that credit lines are strictly tied to the loan’s intent (e.g., educational credit for school fees).
- Interest-Free Window: Most participating banks, including HDFC, ICICI, and SBI, offer an interest-free period of 15 to 45 days.
- Student Inclusivity: New pilot programs now allow students over 18 to access micro-credit lines ranging from ₹5,000 to ₹25,000 based on digital KYC.
In a move that signals the end of the “insufficient funds” error message, the National Payments Corporation of India (NPCI) has integrated pre-sanctioned credit lines directly into the UPI ecosystem. This feature, popularly known as “UPI Now Pay Later,” transforms a standard UPI ID into a digital credit card, providing millions of Indians with instant financial flexibility without the need for physical plastic.
The initiative is designed to bridge the gap between high-frequency digital payments and short-term liquidity needs. By allowing banks to link a revolving credit line to a user’s Virtual Payment Address (VPA), NPCI has created a seamless bridge between traditional lending and modern payment infrastructure.
How the Digital Credit Line Operates
Unlike traditional Buy Now Pay Later (BNPL) apps that operate in silos, the UPI Credit Line is a bank-driven product. Banks analyze a customer’s profile, transaction history, and CIBIL score to set a pre-approved limit, typically ranging from ₹20,000 to ₹1,00,000.
When making a payment via apps like Google Pay, PhonePe, or PayZapp, users simply select their “Credit Line” account from the dropdown menu instead of their savings account. The transaction is authenticated using a dedicated UPI PIN, ensuring a layer of security distinct from their primary bank account.
Eligibility and Stricter Verification Rules
To maintain the health of the credit ecosystem, NPCI and the RBI have implemented robust eligibility criteria. Applicants must be Indian citizens aged 18 or older with a valid Aadhaar and PAN linked to their mobile number. While the standard requirement for a premium limit remains a CIBIL score of 750 or higher, banks have recently introduced “Secured Credit Lines” for those with lower scores, often backed by Fixed Deposits (FDs).
Under the newest 2025 guidelines, all new credit-linked UPI accounts undergo enhanced KYC verification. Furthermore, inactive credit lines (those unused for over 12 months) are automatically deactivated to prevent identity theft and fraud.
Educational Payments and Merchant Categories
A significant update in 2025 is the integration of credit lines for educational purposes. Following directives from the Ministry of Education, schools and colleges have been assigned specific Merchant Category Codes (MCCs). This allows parents to use dedicated educational credit lines to pay tuition fees via UPI, ensuring that credit sanctioned for “education” cannot be diverted to “lifestyle” or “speculative” spending.
The Strategic Advantage over Credit Cards
The UPI Credit Line offers several advantages over traditional credit cards:
- Zero Entry Cost: Most banks do not charge an annual fee for maintaining a UPI credit line, unlike many mid-tier credit cards.
- Universal Acceptance: While many small vendors lack PoS machines for credit cards, almost every merchant in India now accepts UPI QR codes.
- Instant EMI: For purchases exceeding ₹10,000, users can instantly convert their UPI credit spend into 3, 6, or 12-month EMIs directly within their payment app.
Security and Responsible Lending
As the digital economy expands, NPCI has placed a heavy emphasis on “Purpose Integrity.” Banks are now required to monitor the “end-use” of funds. If a transaction is attempted at a restricted merchant (such as gambling or high-risk speculative platforms), the credit-linked payment is automatically declined. This transparent and secure environment protects both the consumer from debt traps and the bank from high-risk defaults.
