UPI: How can I make a UPI payment with insufficient balance?

With the advent of digital banking in India, online transactions have increased significantly in recent years. With the use of net banking and the Unified Payments Interface (UPI), one can easily make payments in a matter of seconds. Users link their bank accounts through UPI-enabled apps and make fund transfers as well as online payments instantly.

Many users are increasingly shifting to UPI payments due to the ease of transaction and convenience. So far, UPI payment was possible only when you had sufficient balance in your bank account. However, users can now also make UPI payments with even insufficient balance.

The Reserve Bank of India recently permitted the inclusion of pre-approved credit lines for UPI transactions. Now, a few banks have started offering the 'Pay Later' option to help users make payments with their pre-approved credit limit. The credit lines are linked to users' UPI accounts to facilitate seamless payments.

What is UPI Pay Later?

The users were only allowed to use their savings accounts, overdraft accounts and prepaid wallets for UPI transactions so far. The RBI’s recent decision to allow pre-approved credit lines for UPI transactions will now allow them to make payments even with insufficient balance. This will work through almost every UPI application including Google Pay, Paytm and PhonePe.

After giving consent to banks for a credit line with a predefined limit, users can spend the sanctioned amount via their UPI app and settle their dues by the pre-determined deadline. However, a fee could be levied for using the pre-sanctioned credit limit.

Presently, both HDFC Bank and ICICI Bank have started their credit lines with HDFC UPI Now Pay Later and ICICI PayLater, respectively. Both banks have kept a maximum credit line of Rs 50,000 based on the account holders’ eligibility. To use these services, one can use the credit to pay their dues or make payments and later settle the entire amount along with the charges or interest rates at the end of the month.

How to make payments with UPI Pay Later?

- One can begin by activating the 'PayLater' option on their UPI apps.

- Once the account is created, a certain credit line will be assigned to make transactions via UPI.

The overdraft account under PayLater can be only used for making payments to merchants. Fund transfer to any other bank account is strictly restricted.