Business

Credit on UPI: how RuPay credit cards and credit lines on UPI work

"Credit on UPI" is two different products: a RuPay credit card linked to your UPI app, and a pre-approved credit line from a bank that you spend through UPI. Here is how each is set up, where it works, who pays the fees, how repayment and interest work, and what it means for small shops.

Chander Prakash

By Founder & Editor

9 min read

Illustrative cover: Credit on UPI: how RuPay credit cards and credit lines on UPI work
Illustration: Pointales

“Credit on UPI” means paying through your UPI app with borrowed money instead of money in your bank account. Two different products sit behind that phrase: a RuPay credit card linked to a UPI app, allowed by the RBI from 2022, and a pre-sanctioned credit line, a pre-approved borrowing limit from a bank that you draw on through UPI, allowed from 2023. Both work at merchant QR codes and online checkouts, neither can send money to a friend, and both are loans that must be repaid on time. The details, costs and risks differ.

The two products, side by side

RuPay credit card on UPICredit line on UPI
What you are spendingYour existing RuPay credit card’s limitA pre-approved loan limit at your bank
Who allowed itRBI, June 2022; NPCI rules Oct 2022RBI, April 2023; circular of 4 Sept 2023
Who can offer itBanks that issue RuPay credit cards (other networks are not allowed on UPI)Scheduled commercial banks, including small finance banks since Feb 2025; not payments banks or regional rural banks
Where it worksMerchant payments (QR, online checkout) onlyMerchant payments only
Not allowedPerson-to-person transfers, cash, lending apps, mutual funds, IPOs and other listed categoriesPerson-to-person transfers
BillingYour normal card statement, interest-free period and due dateSet by the bank’s board-approved policy: limit, period, interest
Merchant costNil for small offline merchants up to ₹2,000; card-style charges above thatSet by the bank; not covered by NPCI’s October 2026 UPI MDR framework

In both, UPI is the pipe and the bank is the lender. Our pillar on how UPI works and who pays for it explains the pipe; this piece is about what changes when the money behind it is credit.

How did a credit card get into UPI?

Until 2022, UPI could only move money between bank deposit accounts, with prepaid wallets added later. In his statement of 8 June 2022, the RBI Governor said it was “now proposed to allow linking of credit cards on the UPI platform”, starting with RuPay, the domestic card network run by NPCI. NPCI followed with an operating circular on 4 October 2022 setting out how cards would be linked and priced.

Four years on, “starting with RuPay” has not moved. Bank terms such as ICICI Bank’s state that only RuPay credit cards can be linked to UPI, and in September 2026 the Department of Financial Services reiterated that NPCI’s rules permit credit on UPI only through RuPay, as reported by Outlook Money. Visa and Mastercard credit cards cannot be used this way as of October 2026.

Linking a card takes a few steps inside any UPI app:

  1. Open payment methods or UPI settings and choose “RuPay credit card”.
  2. Pick the issuing bank. The card is found through the mobile number registered with the bank, which must match the number on the UPI app.
  3. Confirm the card (last digits and expiry) and set a UPI PIN for it. NPCI treats this as your consent to enable the card.
  4. At a shop, scan the QR code as usual and pick the card from the list of accounts before entering the PIN.

ICICI’s page adds that online payments must be enabled on the card, and a replaced card must be linked again.

What is a credit line on UPI, and how is it different?

A credit line is not a card at all. In its policy statement of 6 April 2023, the RBI proposed “enabling transfer to / from pre-sanctioned credit lines at banks” so that “UPI network will facilitate payments financed by credit from banks”. The circular of 4 September 2023 made it operational: payments through a pre-sanctioned credit line issued by a scheduled commercial bank to an individual are allowed on UPI “with prior consent of the individual customer”, and each bank sets the terms under a board-approved policy, including “credit limit, period of credit, rate of interest”. The circular was updated on 12 February 2025 to add small finance banks; payments banks and regional rural banks remain excluded.

In practice, a bank pre-approves a limit for a customer it already knows, the customer accepts it in an app, and the line appears as a payment account alongside the savings account. HDFC Bank’s credit line on UPI, for example, is offered to “select pre-approved customers” with a limit of up to ₹2 lakh, up to 45 days interest-free, a billing date the customer chooses and auto-debit of the outstanding amount on the due date. Other banks structure theirs differently, so the terms sheet matters more than the label.

Where does credit on UPI work, and where will it be refused?

Both products are for paying merchants. You cannot use either to send money to a person. SBI Card’s UPI terms put it plainly: the facility “is only applicable to Peer-to-Merchant (P2M) transactions”, and person-to-person, card-to-card and “P2PM” transfers are not allowed. Cash withdrawal is not available.

P2PM is the small-merchant category on UPI, used by street vendors and small shops treated like individuals for fee purposes. A credit card will not work on many of those QR codes, which is one reason credit on UPI is more useful at a supermarket than at a tea stall.

NPCI also keeps a list of blocked merchant categories, which SBI Card reproduces: cash disbursement at banks and ATMs, lending platforms, digital account opening, securities brokers, wire transfers and money orders, foreign currency, lotteries and betting, and credit card bill payment. ICICI Bank adds IPO applications and mutual funds. The aim is to stop credit being turned into cash or used to pay off other credit.

Who pays what?

The customer pays nothing extra at the point of sale. The fee question sits with the merchant and the banks, as for any card payment (our explainer on what MDR is covers the mechanics).

Below ₹2,000 at small shops: nothing. NPCI’s October 2022 circular, as reported by Inc42, set “Nil MDR (no interchange, PSP & app provider charges)” for small offline merchants on transactions up to ₹2,000. The RBI’s MDR circular of 6 December 2017 defines small merchants as those with turnover up to ₹20 lakh in the previous financial year.

Above ₹2,000, and at larger merchants: card-style fees. The same circular applied existing RuPay credit card interchange above that threshold, with the acquiring bank reimbursing 8 basis points each to the payment service provider and the UPI app. From 1 April 2026 the app-provider fee was cut to 6 basis points for the “non-industry” category and 3 for the “industry” category, according to a Paytm exchange filing reported by Medianama; the small-merchant category under ₹2,000 was untouched. NPCI does not publish the interchange schedule; press reports put the total merchant cost in the 1–2% range typical of credit cards. The final rate is set by the merchant’s acquirer or payment aggregator.

The new UPI MDR does not apply here. NPCI’s 0.4% MDR on specified merchant UPI payments above ₹2,000, announced for 15 October 2026 as reported by The Tribune and deferred on 13 October to a date after Diwali, covers payments from bank accounts. NPCI’s FAQ of 15 September 2026, summarised by SCC Online, says RuPay credit cards and credit lines on UPI are not covered and stay under existing credit-product rules.

One more rule protects cardholders. In August 2024 NPCI told issuers that rewards on RuPay credit cards used through UPI must not be lower than on the same card at a terminal, except where the issuer earns no interchange, as Business Standard reported. So a sub-₹2,000 payment at a small shop may earn no points; a bigger one at a chain store should.

Interest, billing and what happens if you pay late

A RuPay card on UPI is still a credit card, so the RBI’s credit card rules apply. Transactions appear on the monthly statement, and if the full bill is paid by the due date there is no interest. The RBI’s March 2024 amendment to its credit card directions spells out the traps: the interest-free period is lost if any balance from the previous bill is unpaid; interest and late-payment charges may be levied only on the amount outstanding after the due date; and an account can be reported as “past due” or penalised only once it is more than three days late. Every statement must warn that paying only the minimum due stretches repayment “over months/years” with compounding interest.

A credit line follows the bank’s own policy rather than the card rules, which is why the RBI circular tells banks to fix the limit, period and interest rate up front. Some lines offer an interest-free window; others charge from the day you draw. Read the sanction terms before linking.

Both products feed your credit report. Since 1 January 2025, lenders must update credit bureaus fortnightly under the RBI’s circular of 8 August 2024, so a missed due date reaches your file within weeks. The fraud risk is the same as for any UPI account, except that a scammer who gets you to approve a payment is spending your credit limit, not your balance; our guide to how UPI frauds work covers the common tricks.

How big is it?

Credit on UPI is small next to UPI itself, but growing fast, and NPCI’s headline monthly UPI numbers leave it out. The latest official figures come from a Rajya Sabha answer of 3 December 2024, as reported by Business Standard: RuPay credit card transactions on UPI rose from 362.8 million worth ₹33,439 crore in all of FY2023-24 to over 750 million worth ₹63,826 crore in April to October 2024 alone. In February 2025 NPCI’s chief executive said about 16% of credit card spending was on RuPay, and about half of that through UPI, per IBEF.

Credit lines are much smaller: in August 2024 NPCI put credit card spending through UPI at roughly ₹10,000 crore a month and credit lines at ₹100–200 crore, as Inc42 reported. No newer official breakdown was available as of October 2026.

What it means for small merchants

For a shop with turnover under ₹20 lakh, accepting a RuPay credit card through its existing QR code costs nothing on payments up to ₹2,000, and may win sales from customers who would otherwise wait for payday. Above ₹2,000, or for larger merchants, a credit payment costs more than a bank-account UPI payment, closer to a card swipe, so the merchant should know which rate its acquirer applies. Shops on P2PM codes will see credit payments fail; a full merchant QR is the fix, with the fees that brings.

The point: Credit on UPI is UPI’s familiar scan-and-pay with a loan behind it: either a RuPay credit card or a bank’s pre-approved credit line, merchant payments only, with the bank as lender and UPI as the pipe. Small shops pay nothing under ₹2,000; above that it is priced like a card. For the customer the convenience is real, and so are the credit card rules on due dates, interest and credit reports.

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Chander Prakash

Chander Prakash Founder & Editor

Chander Prakash is the founder and editor of Pointales. He reviews every story before it is published and sets the publication's editorial standards, with a focus on clear, well-sourced explanations of business and technology.

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