The National Payments Corporation of India (NPCI) is preparing to introduce a new UPI EMI payment feature that will allow users to convert UPI transactions into Equated Monthly Installments (EMIs).
Instead of paying the full transaction amount in one go, customers will have the option to split their payments over multiple months directly via UPI.
NPCI plans to enable fintechs, banks, and UPI-based apps to integrate this EMI option at the time of transaction.
Why NPCI Is Doing This: Strategic Rationale
- Expanding Credit Penetration
India has a large under-served segment in formal credit markets. By embedding credit (EMI) into UPI, NPCI aims to bring more users into digital lending. - Boosting Transaction Value
Higher-value purchases that were earlier avoided due to upfront cost may now be possible via installments, increasing average ticket sizes on UPI. - Strengthening UPI’s Role Beyond Payments
UPI will transition from pure payments infrastructure to a platform for credit services—a convergence of payments + lending. - Leveraging Fintech & Banking Synergies
By allowing fintechs and banks to integrate EMI options, NPCI is pushing for collaboration across the payments ecosystem.
How It Could Likely Work (Based on Reports)
While official details are yet to be fully disclosed, media reporting suggests:
- At checkout (or while paying via UPI), an “EMI” option may be shown as a choice. Inc42
- The user’s credit profile, prior history, and eligibility will likely be evaluated before allowing conversion to EMI.
- Fintechs and banks will integrate this feature in their UPI apps or merchant interfaces.
- Interest, tenor (number of months), and other terms will be displayed upfront. (This is a logical assumption based on existing EMI models.)
- NPCI will need to ensure compliance, settlement, risk, and credit provisions in the backend.
Challenges & Risks to Address
- Credit Risk Management: Converting payments to EMIs involves default risk, requiring robust underwriting, fraud checks, and collections.
- Regulatory Compliance: The RBI and other regulators may intervene to ensure fair practices, consumer protection, and interest disclosure.
- Technical & Settlement Infrastructure: NPCI will need to adapt settlement cycles, risk buffering, and integration with banks/fintechs.
- User Awareness & Trust: Consumers must trust that opting for EMI via UPI won’t lead to hidden charges or adverse credit reporting.
- Merchant Acceptance & Cost: Merchants may resist or negotiate fee sharing; they might demand incentive to accept EMI-based UPI.
What It Means for Stakeholders
| Stakeholder | Potential Benefit | Possible Concern |
|---|---|---|
| Consumers | Ability to make larger purchases by paying in installments via UPI | Burden of debt, unclear terms, interest costs |
| Fintechs & Banks | New revenue streams via interest / credit products & user stickiness | Credit defaults, integration costs, regulatory scrutiny |
| Merchants / E-commerce | Higher average order value and improved conversion | Negotiating fees, settlement changes |
| NPCI / UPI Ecosystem | Strengthened position as a platform for payments + credit | Managing systemic risk, regulatory oversight |
Broader Implications for India’s Fintech & Digital Payments
With this move, NPCI is signaling a next phase in India’s payments evolution—Payments + Embedded Credit. UPI could become a one-stop interface for not just transferring money, but financing purchases seamlessly.
This shift aligns with global trends like “Buy Now, Pay Later (BNPL)” and embedded finance, but NPCI’s advantage is scale, reach, and regulatory backing.
If successfully implemented, new UPI EMI payment feature could accelerate digital credit adoption among previously underbanked users, reshape consumer behavior, and intensify competition among fintechs and banks.
Conclusion
The planned NPCI launch new UPI EMI payment feature has the potential to be transformative in India’s digital finance space. It could democratize credit access, increase digital payment volumes, and reshape how we pay.
But success will depend on execution—risk control, consumer protection, transparent terms, and collaboration across fintech, banking, and regulatory stakeholders.
