UPI enhances credit base

Unified Payments Interface (UPI) has significantly enabled underserved groups, including subprime and new-to-credit borrowers, to access formal credit for the first time, according to a report.

In regions with high UPI adoption, loans to new-to-credit borrowers grew 4% and to subprime borrowers by 8%, said the report, titled Open Banking and Digital Payments: Implications for Credit Access. The average size of a fintech loan was ₹27,778 - about seven times the rural monthly expenditure, it added.

"Fintech lenders scaled rapidly, increasing their loan volumes by 77 times, far outpacing traditional banks in catering to smaller underserved borrowers," the report said, adding that despite the credit surge, default rates did not rise, showing that UPI-enabled digital transaction data helped lenders expand responsibly.


The report pointed out that between 2015 and 2019, fintech loans to subprime borrowers grew to match those of banks, with fintechs thriving in high UPI-usage areas. The affordability of digital technology played a critical role, enabling widespread UPI adoption.