HDFC Bank has partnered with Zeta to power its Credit Line on UPI (CLOU) offerings and launch innovative credit products on NPCI’s CLOU scheme, which is expected to grow to a $1 trillion opportunity for banks by 2030.
The Indian banking giant will leverage Zeta’s Digital Credit as a Service (DCaaS) solution to power the Credit Line on UPI scheme which was announced by NPCI late last year.
The credit line allows banks to connect pre-approved credit lines directly to the UPI user base, which translates to easier credit access for individuals and businesses while offering banks access to a much wider audience through the established UPI ecosystem.
“CLoU is a credit superhighway”
Rajanish Prabhu, Sr Executive Vice President, HDFC Bank, said: “HDFC Bank strongly believes in fintech partnerships that bring together the strengths of both entities. Our association with Zeta includes working together on PayZapp, the Bank’s payment app, the acceptance of which continues to grow at a very rapid pace. We are glad to develop the Credit Line on UPI (CLOU) offering with Zeta enabling our customers to enjoy the benefits of an affordability program combined with the ease of doing an UPI transaction.
Ramki Gaddipati, CEO APAC, Global CTO & Co-Founder, Zeta, commented: “We are grateful for the trust reposed in us by HDFC Bank for this important initiative. CLoU is a credit superhighway – and our solution is architected to leverage its innovative capabilities across the entire credit distribution lifecycle spanning underwriting, origination, distribution, usage, repayments, collections, and more. And, unlike alternative approaches that rely on bolting on capabilities to an existing UPI switch or an LMS, Zeta’s solution has been carefully engineered ground-up as a UPI-first, mobile-first, and cloud-native credit products ecosystem.”
What is the Credit Line on UPI (Unified Payments Interface) scheme
The Credit Line on UPI (Unified Payments Interface) scheme was announced by the National Payments Corporation of India (NPCI) in late 2023. The initiative is aimed at expanding the scope of UPI by allowing users to access pre-approved credit lines via their UPI apps. Here’s an overview of the key aspects:
What is it: The scheme enables users to link pre-sanctioned credit lines from banks to their UPI accounts. This allows users to make payments directly through UPI using these credit lines instead of relying solely on their bank account balance. Essentially, it introduces a credit facility similar to credit cards but integrated directly within the UPI ecosystem.
How does it work:
- Pre-Approved Credit Lines: Banks can offer pre-approved credit lines to eligible customers. These credit lines are linked to the customer’s UPI ID.
- UPI Payments: When making a payment, the user can choose to draw funds from their linked credit line instead of their bank account balance. The transaction is processed like any other UPI payment.
- Repayment: Users repay the borrowed amount based on the terms set by the bank, which may include interest charges, similar to a credit card.
Why was it introduced? The NPCI introduced this scheme to enhance the flexibility and appeal of UPI by integrating credit features. This move is expected to encourage more digital transactions, offer consumers greater financial flexibility, and increase the adoption of UPI for higher-value transactions.
Many banks and fintech companies have welcomed the initiative, as it provides an additional revenue stream through interest and fees on the credit lines. The scheme is beneficial for users who prefer the convenience of UPI but also require access to credit for certain transactions.
