This policy brief presents a detailed overview of India’s Unified Payments Interface (UPI) as a key driver of Digital Public Infrastructure (DPI) and its expanding role in credit access to promote financial inclusion. Highlighting the current landscape, it addresses critical challenges such as NBFC participation constraints, MSME credit gaps, and the limited credit provider base linked primarily to RuPay credit cards. The brief illuminates the regulatory and market frameworks required to foster an inclusive, competitive, and innovative digital lending ecosystem within India’s financial architecture.
The brief covers:
UPI Credit Ecosystem: Key actors, credit models, and system capabilities evolving within the UPI ecosystem.
Challenges: Structural barriers affecting NBFC inclusion, market competition, merchant discount rate (MDR) policies, and consumer choice limitations.
Policy Directions: Recommendations on phased NBFC onboarding, sustainable MDR frameworks, data governance enhancements, and ecosystem readiness.
Financial Inclusion Impact: How reforms support equitable MSME credit expansion and fortify India’s digital finance roadmap.
Forward Outlook: Envisioning competitive, resilient digital lending integrated with UPI-powered DPI.
Objective
This brief aims to guide policymakers, regulators, financial institutions, and fintech innovators in shaping an inclusive, robust credit access environment on UPI, aligned with India’s aspirations for scalable and equitable digital finance growth.
