In a significant announcement during the Monetary Policy Statement today, RBI Governor Shaktikanta Das stated that small finance banks (SFBs) will now be allowed to sanction credit lines through the Unified Payments Interface (UPI), marking a major boost to digital credit accessibility.
Key Highlights:
1. UPI Credit Line Extension to SFBs:
- Small finance banks can now offer credit lines on UPI, expanding financial inclusion.
- This initiative aims to provide greater digital lending opportunities to small businesses and individuals, leveraging UPI’s robust infrastructure.
2. Enhanced Collateral-Free Loan Limit for Small Farmers:
- The limit for collateral-free loans to small farmers has been increased from Rs 1.6 lakh to Rs 2 lakh, offering much-needed financial support to rural borrowers.
- This move is expected to alleviate credit constraints and improve agricultural productivity.
Governor Das on Financial Sector Transformation:
Highlighting the rapid transformation in the financial sector, Das emphasized the role of advanced technologies, including:
- Artificial Intelligence (AI): Revolutionizing decision-making and efficiency.
- Tokenization: Enhancing security in digital transactions.
- Cloud Computing: Enabling scalability and innovation in financial services.
The RBI governor reiterated the central bank’s commitment to fostering financial inclusion and strengthening the economy through progressive policy measures.
Implications:
- The extension of UPI credit lines to SFBs is set to democratize access to credit, particularly for underserved sectors.
- The enhanced collateral-free loan limit will provide crucial support to small farmers, empowering them to meet their financial needs without additional burden.
