Evolving UPI – Credit Limit for Insufficient bank balances.

Ever since the UPI (Unified Payment System) is introduced in India, it has been evolving at a very rapid pace. Every now and then we get to hear some new development in its usage. In case you missed out on my earlier post, refer here to know how the latest digital payment system developed in India is a game changer for the world economy. Not only in India but also in many other countries has already talking about it.

Like any other payment system, UPI is also an electronic mode of payment. However instead of making use of account details, it directly make use virtual payment address. The use of VPA, allow the user to execute any payment transaction at ease through virtual payment address without sharing any of banking details. Which is called as UPI ID. It makes use of the linked mobile number to the bank. Through UPI one can easily make payments in a matter of seconds.

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Many Indian user have already started shifting to the UPI mode of payment. So far, UPI payment is allowed only to the linked bank having a sufficient balance. In case there is shortage of fund, the payments get failed or the transaction unable to execute and get declined. For a successful transaction, one must need to have sufficient balance in the account. However as per the recent RBI guidelines user can avail some overdraft option too through the UPI mode of payment. It means users can now make UPI payments even with insufficient balances.

Credit Limit & Pay Later

This new option is known as Pay Later. This is a pre-approved credit lines for UPI transaction offered to some of the users. Few of the banks in India like ICICI and HDFC have made the offer to some of the user having a good repo. They were assigned some pre-approved credit limit on the basis of their banking transaction. For sure this is introduced as a testing phase to check the success of this new payment option. The credit limit is again linked to the users UPI accounts to facilitate seamless payment.

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There is certain limit assigned to each of the user. And the user is supposed to make use of the pay later option only upto that amount limit. This option will work through almost every UPI application. After getting the predefined credit limit from the banks the user can spend the sanctioned amount via their UPI app. The user is supposed to settle their dues by the pre-determined deadline. Failing to do so, may ask for some additional penalty. Already the bank will charge certain fee for availing the pre sanctioned credit limit for pay later option.

This pay later option or the credit limit comes with a check. This option can only be used for making merchants payment like shopping etc. Fund transfer to any other bank account or withdrawing the same is strictly restricted. This option is basically implied to safeguard the user interest in payment and to avoid any misuse of the funds.

It was not long ago that the UPI ATM was launched in India, where a user can make cardless withdrawal. Now within a month, this new option is traded to the user, so that to experience digital payment system. It is amazing how things are unfolding at such a rapid pace.

Peace!!

Namaste @steemflow

Posted Using LeoFinance Alpha