RBI Tightens UPI Credit Line Rules Effective August 31

The Reserve Bank of India (RBI) has revamped the guidelines for UPI-linked credit lines, tightening compliance norms for banks and payment operators. Starting August 31, 2025, customers will no longer be allowed to divert funds from their UPI credit line accounts to other purposes beyond permitted transactions. This move aims to bring discipline in credit usage and prevent misuse of revolving credit facilities through UPI, which have grown sharply since their introduction. According to RBI officials, some users were transferring credit line amounts to savings accounts or digital wallets, treating them as personal loans instead of point-of-sale credit. Industry experts believe this policy will ensure that UPI credit lines function as intended — a short-term credit facility for genuine transactions, not for speculative or unregulated transfers. While banks are expected to tighten backend monitoring, fintech players have also been directed to update their systems before the deadline. The RBI has reassured consumers that genuine merchant transactions, bill payments, and e-commerce purchases via UPI credit lines will remain unaffected. However, direct withdrawals or peer-to-peer transfers from these accounts will be restricted.