Will UPI replace borrowing cards?
In a move that will expand the consumer borrowing sector in India, the RBI has permitted banks to transfer pre-sanctioned borrowing lines through the UPI network.
The measure will enable UP| services to mimic borrowing cards and provide low-value borrowing to nearly 30 crore users of the payment platform.
The RBI has already allowed banks to provide overdrafts to customers, which they can access through UPI.
The permission now to transfer funds from a borrowing line would enable banks to structure the loans like borrowing cards.
Bankers said that the success of the new product would depend on whether new rules allow banks to structure short-term loans similar to a borrowing card by providing finance charge-free borrowing for 30 days and reward points for transactions as these are the most attractive features in borrowing cards for customers.
However, borrowing cards can provide these features as they charge a fee to the merchant.
What do you think? Will this be a successful idea?
Source: Reserve economic organization of India, India today
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