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Credit line on UPI payments arrive in the same UPI settlement file as bank-account UPI but are out of scope of the 15 October 2026 UPI MDR (NPCI FAQ Q36) and carry a separate MCC-based merchant charge.
Split every UPI settlement line by payment instrument into bank-account UPI, RuPay credit on UPI, credit line on UPI and PPI-wallet on UPI, then check each line only against the expected-rate table for its own sub-rail.
Instrument or sub-type field confirmed with the acquirer; bank-account UPI table of 0 percent at or below ₹2,000 and 0.4 percent above, capped ₹300 at or above ₹75,000; credit-line rate per MCC from the merchant agreement; PIL-status watch.
Sub-rail-wise charge variance report with credit-line lines checked against the contracted MCC rate, no false MDR alerts from credit-line charges, and a list of unlabelled UPI lines to raise with the acquirer.
Last verified 27 September 2026. The notified framework, effective 15 October 2026, is currently subject to a pending Supreme Court challenge (PIL filed 16 September 2026). This article describes the notified position as of that date.
From 15 October 2026 most finance teams will rebuild their UPI charge checks around the new bank-account MDR. One UPI sub-rail does not belong in that table at all: the pre-sanctioned credit line on UPI. It settles through the same UPI pipe, often in the same settlement file, but it is priced under different rules. If it is not separated, it either triggers false leakage alerts or hides real overcharges. For the full new-MDR schedule, see the UPI MDR 2026 flagship.
What is a credit line on UPI?
A credit line on UPI lets a customer pay a merchant from a bank-sanctioned credit facility instead of a savings account. The regulatory chain is short:
- 6 April 2023: RBI announced the proposal in its Statement on Developmental and Regulatory Policies.
- 4 September 2023: RBI circular RBI/2023-24/58 permitted pre-sanctioned credit lines at banks to be linked to UPI.
- 20 September 2023: NPCI operating circular UPI-OC-171 (“Pre-Sanctioned Credit Lines at Banks through UPI”) operationalised it and required acquirers to enable merchants for credit-line acceptance.
- February 2025: RBI extended the facility to small finance banks, as reported by Business Standard.
- 31 August 2025: an NPCI circular dated 10 July 2025, as reported by Upstox on 21 July 2025, listed credit categories including credit against fixed deposits, bonds or shares, property and gold, personal loans, business loans, unsecured credit and Kisan Credit Card loans. It allowed P2P, P2PM and cash withdrawals alongside P2M, with reported limits of ₹1 lakh per 24 hours for P2P and P2M, ₹10,000 per day for cash withdrawal and a maximum of 20 P2P transactions a day. The issuing bank approves or declines each payment against the defined purpose of the credit.
It is distinct from a RuPay credit card linked to UPI, which is covered in the RuPay credit card on UPI guide.
Why is it outside the new UPI MDR?
The NPCI FAQ dated 15 September 2026, hosted on financialservices.gov.in, answers this in Q36: RuPay credit on UPI and credit lines on UPI are out of scope of the new UPI MDR and “operate under separate credit product rules”. The 0 percent / 0.4 percent / ₹300-cap schedule applies only to bank-account UPI. A credit-line payment of ₹1,500 is therefore not automatically zero-cost, and a credit-line payment of ₹80,000 is not capped at ₹300.
What does a credit line on UPI cost the merchant?
The merchant pays a charge or interchange set by NPCI that varies by merchant category code (MCC). The customer does not pay it. No single published rate applies across categories. In July 2024 BusinessToday reported that NPCI was considering an interchange of around 1.2 percent; treat that as a press report from the time, not a current rate. Confirm the rate for your MCC with your acquiring bank or gateway and record it in your merchant agreement file.
| UPI sub-rail | Merchant cost basis | Where the rate comes from |
|---|---|---|
| Bank-account UPI (from 15 Oct 2026) | 0% at or below ₹2,000; 0.4% above; capped ₹300 per transaction at or above ₹75,000 | NPCI FAQ, 15 September 2026 |
| RuPay credit card on UPI | Zero at or below ₹2,000; approximately 2% above | Separate credit product rules (FAQ Q36) |
| Credit line on UPI | NPCI-set charge varying by MCC | Acquirer or gateway agreement (FAQ Q36) |
| PPI-wallet on UPI | Zero at or below ₹2,000; 0.5% to 1.1% above, by merchant category | NPCI circular, 24 March 2023 (not changed by the new MDR) |
How do you separate it in the settlement file?
Acquirers and gateways typically expose a payment-instrument or sub-type field on each UPI settlement line. Names vary, so ask your provider what the field is called and what value marks a credit-line payment. Then run four steps:
- Split every UPI line into bank-account UPI, RuPay credit on UPI, credit line on UPI and PPI-wallet on UPI.
- Apply the matching rate table to each group only. Credit-line lines are checked against the contracted MCC rate, never the 0.4 percent schedule.
- Park unlabelled lines in an exceptions queue rather than defaulting them to bank-account UPI.
- Reconcile charges and GST on charges back to the acquirer’s invoice by sub-rail.
The common failure is lumping credit-line payments into a single “UPI” bucket. Checked against the 0.4 percent schedule, they look like MDR billing errors and swamp the exceptions queue with false leakage. Accepted without any rate table, a charge above the contracted MCC rate passes silently. Both are avoided by the split in step 1. A payment gateway reconciliation workflow that keeps sub-rail as a matching attribute makes this repeatable each settlement cycle.
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- ▸ NPCI FAQ dated 15 September 2026 — Merchant Discount Rate (MDR) on Select UPI (P2M) Transactions — Q36: RuPay credit on UPI and credit lines on UPI are out of scope of the new UPI MDR and operate under separate credit product rules.
- ▸ RBI circular RBI/2023-24/58 dated 4 September 2023 — Expanding the Scope of UPI: Inclusion of Credit Lines — Permitted pre-sanctioned credit lines at banks to be linked to UPI, following the Statement on Developmental and Regulatory Policies of 6 April 2023.
- ▸ NPCI operating circular UPI-OC-171 dated 20 September 2023 — Pre-Sanctioned Credit Lines at Banks through UPI — Operationalised credit lines on UPI and required acquirers to enable merchants for credit-line acceptance.