From UPI to Credit on UPI: How Digital Public Infrastructure is Rewiring India’s ₹200 Lakh Crore Banking Grid
India’s payments stack is no longer just a rail for money movement; it is becoming a distribution layer for credit. The National Payments Corporation of India’s credit-line-on-UPI framework, combined with Account Aggregator consented data and bank-fintech co-lending, is pushing formal credit deeper into the country’s MSME economy without the friction of branch-led underwriting. For lenders, the prize is access to millions of thin-file borrowers. For regulators, the risk is that speed and scale could outpace underwriting discipline. The shift is especially consequential for public sector banks such as SBI and private lenders including HDFC Bank and ICICI Bank, which are partnering with fintechs like Pine Labs and Razorpay to originate and service small-ticket, often unsecured loans. But the model sits inside a tighter prudential regime: RBI’s higher risk weights on unsecured lending, stricter NPA recognition, and pressure to model default behavior in real time. The result is a new contest over who controls credit risk in India’s ₹200 lakh crore banking system.