UPI Credit Line Goes Live 2026: Can UPI Really Replace Credit Cards in India?

In India, the digital payment industry has seen rapid improvements in the past decade, primarily attributed to UPI (Universal Payment Interface). Even now, UPI remains the backbone of the Indian digital payment systems as it continues to handle millions of transactions each month. 

As we near the end of 2026, the UPI credit line is starting to gain traction. With new partnerships between banks and fintech firms (such as Slice), the UPI credit line is an interesting development. One important question to ask is whether the UPI credit line can be considered an alternative to credit card facilities in India.

In simple terms, the answer is not yet, but the UPI credit line is starting to change the borrowing and spending trends in India. In the following sections, we will analyse the UPI credit line in the context of UPI versus credit card debates and further assess its implications for Indian fintech.

What is UPI Credit Line?

UPI Credit Line is a facility that can be availed through an app linked to your UPI account. The National Payments Corporation of India (NPCI) gives you the option of carrying a line of credit to make your payments. Using a credit card is not a requirement. 

Based on your UPI transactions, banks and other lenders use artificial intelligence (AI) and analytics to give you credit. Most of the time, they give small amounts of credit but are willing to increase your limit based on your repayment history.

Customers may link the credit line to their payment apps, including PhonePe, Google Pay, Paytm, and BHIM. After that, they can make payments to merchants (P2M) from the credit line, using a UPI-locked credit PIN to access the money. The credit line account can be repaid through inward UPI transactions or through UPI-linked auto-pay mechanisms.

This is different from credit cards with UPI connection (like RuPay cards) where the card is the main account from which the money to be spent is drawn. The UPI Credit Line makes it easy to use credit for payments that can be made through UPI.

 

 

How UPI Credit Line work?

Look for the Credit Line option in your UPI app and select it to link your account. Then, choose your issuing bank (which should be the bank associated with your mobile number). After confirmation, you will be asked to set a PIN.

From then on, your transactions will be made using regular UPI defaults. You will need to scan the QR code, enter the payment amount, and select the credit line for payment.

Some important features are:

- Users can monitor transactions directly in the app.

- No linking fees.

- Enables merchant payments (not all P2P).

- Normal UPI limits.

- Secure logins.

For now (2026), adoption is slow, no transactions, but small finance banks and fintechs targeting the underbanked are interested.

UPI Credit Line vs Credit Cards: Key Differences

In the UPI vs Credit Cardcomparison, we can see them both have their advantages.

Aspect	UPI Credit Line	Traditional Credit Cards / Linked on UPI
Accessibility	Linked to UPI app; no physical card needed	Requires card issuance; physical or virtual
Onboarding	Faster via UPI data; lower friction	CIBIL check, paperwork; longer process
Usage	QR-based, everyday small-ticket spends	POS, online, rewards-focused
Limits	Often lower initially; scalable	Higher for premium cards
Costs	Lower merchant fees; potential interest from day 1 or interest-free variants	Annual fees, interest after grace period
Rewards	Limited currently	Cashback, points, EMI options
Security	UPI PIN; no card details exposed	PIN/CVV; higher fraud risk in some cases
Inclusion	Targets new-to-credit users	Biased toward established profiles

UPI credit line excels in convenience for daily spends, while credit cards offer rewards and higher limits.

Benefits of UPI Credit Line as a Credit Cards Alternative

The UPI credit line serves as one of the top credit cards alternativesfor several reasons:

1. Seamless Integration: One does not need to carry cards, as one can scan and pay using the phone. This feature is useful for local stores and pharmacies as well as street vendors. 

2. Financial Inclusion: This credit line solution also focuses on low-income users as well as people who are new to credit in rural and semi-urban areas. This is possible because UPI does credit underwriting using UPI transaction history.

3. Lower Costs: Payment acceptance costs remain lower for merchants than card swipes and users do not have to deal with a physical card.

4. Faster Scaling: Cards with lower acquisition costs and a higher repayment rate are evidenced by small ticket usage.

5. Behavioural Fit: It utilises existing UPI behaviour and millions of users who currently use QR codes.

In fintech India, Slice and similar companies have started to provide UPI-first solutions. This is also true as credit is being flexibly shifted toward UPI, as the BNPL market is surpassing $30 billion.

Challenges and Limitations Holding It Back

Regardless of the situation, there are limitations:

- Low Adoption: Credit lines are negligible, and as of 2026, transactions will see credit line usage remain low. Most people still prefer using a credit card or an unsecured loan.

- Limited Features: These credit lines are still evolving with fewer cashback rewards and EMI options. 

- Risk Management: Banks are still exploring the viability of UPI small-ticket price ranges and the use of restricted solution-merchants.

- Interest and Fees: Users might be discouraged by options without grace periods.

- Competition: UPI credit line is better for small spending, while credit cards are better for large spending.

UPI credit line adoption will increase with NBFC involvement and changes in regulations.

The Impact of UPI Credit Line in Fintech and Digital Payments in India

India's UPI system revolutionised the world of digital payments and is now also revolutionising the world of lending. The UPI credit line system also allows banks to modernise their systems. UPI credit line provides a partnership to banks for underwriting and collections, as UPI credit line is not a third-party alternative payment system and is not micro-funding.

It helps with inclusivity, is a non-Western lending model, and is a scalable solution to world digital payments.

Does UPI Have The Ability To Replace Credit Cards? 

In the next two to three years, UPI will nab the low-value/high-volume transactions from credit cards, and will eliminate the need for paying with credit cards daily. However, UPI credit line will not replace credit cards for the next 5-10 years. Credit cards will still be rewarded and will be used for large spending.

In 2026, growth is predicted for the integration of more banks and fintechs, along with EMI options. To bridge payments and credit, the UPI credit line will support a cashless economy.

 

 

Conclusion

The UPI credit line is not a fully developed credit cards alternativeas yet, but it is a very powerful way of changing the game. For a large number of Indians, it could transform the way borrowing works. It is as simple as scanning a QR code. The future provisions of fintech India look closely integrated with the UPI framework.

DISCLAIMER: This blog is NOT any buy or sell recommendation. No investment or trading advice is given. The content is purely for educational and information purposes only. Always consult your eligible financial advisor for investment-related decisions.