The Reserve Bank of India (RBI) is proposing expanding the reach of the popular Unified Payments Interface (UPI) digital payments system by allowing credit to be offered via pre-approved bank lines.

“This initiative will further encourage innovation,” RBI governor Shaktikanta Das said on Thursday during the announcement of the central bank’s monetary policy decision.

UPI is an instant real-time payments system that allows users to transfer money across multiple banks without disclosing bank account details. Its popularity is seen to have reduced the usage of cash and debit cards for daily transactions.

In March 2023, UPI recorded 8.65 billion transactions, amounting to 14.05 trillion rupees, its highest-ever since inception, data from the National Payments Corporation of India showed.

In a bid to boost digital payments, the RBI recently allowed RuPay credit cards to be linked to UPI. This was to enable customers to link their credit cards and pay via UPI.

By allowing banks to offer customers a pre-approved credit line, UPI accounts could now offer an alternative to credit cards, said Srinath Sridharan, an independent policy researcher. “It could change the way banks look at credit cards.”

Last month, Bill Gates during his visit to India had praised UPI digital payments system, digital infrastructure, and reliable and low-cost 5G connectivity.

In February, India also linked its UPI and with Singapore’s PayNow digital payments system for cross-border transactions. The linkage of these two payment systems of both countries would enable residents of both countries to the faster and more cost-efficient transfer of cross-border remittances.