| Thursday, 22 January 2026 |
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Good morning [%first_name |Dear Reader%],
With buy-now-pay-later (BNPL) loans having largely vacated the scene, it seems like credit lines on the Unified Payments Interface (UPI) now want to fill that vacuum.
Mint reported that India’s retail payments body is in talks with lenders to roll out credit lines as low as Rs 5,000 on the UPI platform. The product will look to offer credit card-like interest-free periods.
Its contours are still in the works, and it remains to be seen how it will avoid the BNPL trap. The idea of easy, interest-free loans to buy anything led to BNPL companies’ rampant growth and high delinquency, which prompted the RBI to step in and eventually rein it in. Even though the UPI credit line has been in the works since 2023, lenders have been hesitant to double down on this type of product.
Nevertheless, the need for it continues to exist.
Back in 2019, we wrote about how a low-income household was mis-sold a series of credit products never meant for them. As part of that story, experts argued about the need for credit card-like products for low-income households.
“A product like a credit card makes perfect sense for low-income households as they experience short term liquidity constraints and need quick access to low-cost funds for very short periods,” argues Deepti George of Dvara Research, a policy research institution. But in the current reality, it’s treated as an elite product.
The Human Cost of Modern Banking, The Ken
The only way low-income households, especially those in the prime and subprime categories of borrowers, will grow is with some leverage, explained the CFO of a non-banking financial company (NBFC). In banking parlance, prime borrowers are those who are creditworthy, while subprime borrowers are higher-risk.
What could help lenders double down on UPI credit lines is timing.
According to the RBI’s Financial Stability
India’s household debt has been rising—it stood at 41.3% of GDP as of March 2025, a sustained increase compared to its five-year average of 38%. But compared to its peers in emerging markets, India’s household debt remains low.
More importantly, although consumption loans, like personal loans, credit cards, and consumer durable loans, make up 46% of all borrowings, the growth rate of productive loans, like agriculture and education loans, is outpacing them.
What is also a good sign is that the risk profile of the borrowers has been improving.
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