UPI has established itself as India’s most widely adopted digital payments infrastructure. As it progressively integrates credit functionality, the platform is positioned to play a larger role in supporting financial access, especially for individuals and enterprises with evolving credit needs. However, the current framework—where only banks can offer credit lines on UPI—limits a broader section of the financial ecosystem from contributing to this next phase.
Non-Banking Financial Companies (NBFCs) currently serve a significant share of first-time borrowers, small businesses, and customers whose cash-flow patterns require smaller, short-cycle credit. At the same time, the sector has undergone regulatory strengthening under the Scale-Based Regulation framework, with enhanced supervision, liquidity norms, and governance standards. This combination raises an important question: can a carefully designed expansion of CLOU to regulated NBFCs responsibly widen access to formal credit through UPI?
Allowing NBFC participation may support credit availability at the point of transaction, improve financial formalisation, and enable market-led innovation. Yet, such a transition also requires calibrated safeguards to ensure stability, consumer protection, and proportional risk oversight. The design of these safeguards—and the criteria for participation—will define the future trajectory of credit on UPI.
What would a phased, suitability-based inclusion model look like?
How can oversight, risk controls, and MCC-based usage restrictions make expansion both feasible and secure?
The policy brief explores these questions through a structured roadmap and proposes a prudential pathway forward.
📥 Download the complete brief to access the full set of recommendations and regulatory design options.
