Soon You Can Use UPI to Withdraw Loans Against Gold, FDs, Shares & Property

The National Payments Corporation of India (NPCI) issued a circular on July 10, 2025, regarding the use of credit lines through UPI. As per the directive, from August 31, 2025, financial institutions and banks will enable overdraft or credit line facilities to be linked with UPI. 

This means users will now be able to withdraw or transact money from their loan-backed accounts. These credit lines or overdraft facilities can be issued against gold, property, fixed deposits (FDs), mutual funds, or shares and can be linked to UPI via popular apps like PhonePe, Paytm, Google Pay, and more.

Who Is Eligible for a Credit Line Facility on UPI?

The eligibility for availing a credit line facility via UPI depends on the lender’s policies and the customer’s financial profile. Based on available norms across leading institutions and RBI-backed guidelines, here’s who typically qualifies:
 

Note: Final eligibility is determined by the lender’s risk evaluation policy and RBI/SEBI compliance standards.

What Is the New UPI Notification by NPCI?

The new NPCI circular allows broader integration of loan-based accounts with UPI. From September 2025, individuals can use their credit lines, sanctioned against assets like FDs, shares, bonds, properties, or gold, to make everyday UPI payments.

Essentially, this means your UPI apps can now access and use sanctioned loan funds, and not just traditional savings/current accounts. 

The credit line account, once linked, will allow seamless Scan & Pay, UPI ID, or contact-based transfers, offering flexibility to both personal and business users.

Mandatory Implementation Deadline: All UPI member banks, PSPs (Payment Service Providers), credit line issuers, and third-party app providers (TPAPs) must implement this by August 31, 2025.

What Kind of Transactions Are Allowed on UPI Credit Line Facility from August 31, 2025?

Until now, UPI credit line use was restricted to P2M (Person-to-Merchant) transactions only. The new update widens the scope significantly.

Allowed Transactions (Post August 31, 2025)
 

• P2P (Person-to-Person) Transfers
   
• P2PM (Person-to-Person Merchant) Payments
   
• Cash Withdrawals
   
• Scan & Pay, Pay to UPI ID, IFSC Transfers, and more

Note: P2PM refers to transactions with small merchants, with monthly UPI collections under ₹50,000.
 

Limits Apply:

• ₹1 lakh per day for P2P and P2M combined
   
• ₹10,000/day cash withdrawal cap
   
• Max 20 P2P transactions/day
   
• Actual limits may vary by bank’s internal policies

However, availability of these features depends on the issuing bank’s discretion. Banks can decide which transaction types are enabled, based on legal, risk, and regulatory factors.

What Is a Credit Line?

A credit line is a pre-approved loan amount that you can withdraw from as needed, and pay interest only on the used amount, not the total sanctioned limit.

Example: Meet Rohit

Rohit, a salaried professional, pledges his ₹5 lakh fixed deposit as collateral and is sanctioned a ₹4 lakh credit line from his bank.

• Sanctioned Limit: ₹4,00,000
   
• Used: ₹1,00,000 via UPI in September
   
• Interest Rate: 9% p.a.
   
• Interest Charged (only on ₹1L): ₹750/month (approx.)
   
• Repayment Flexibility: He can repay ₹50,000, reuse again, or repay full anytime

This flexibility helps users manage short-term cash needs, while preserving savings/investments like FDs, gold, or mutual funds.

How to Apply for a Credit Line Facility on My Bank Account?

You can apply for this facility both online and offline depending on the bank. Here's how:

Steps to Apply:
 

1. Login to Net Banking / Mobile App
   Look for “Loan Against Assets” or “Credit Line via UPI”
    
2. Choose Asset Type
   Select FD, shares, MF, gold, or property for collateral
    
3. Upload Documents
   PAN, Aadhaar, bank details, asset documents
    
4. Approval and Limit Sanctioned
   Based on asset valuation and credit profile
    
5. Link Account to UPI App
   Once approved, select UPI app to link the credit line account
    
6. Start Using for UPI Payments
   Scan, send, or withdraw—based on allowed transaction types

Tip: Contact your bank’s customer support to know if your account qualifies and whether they’ve enabled this service as per NPCI’s circular.

Conclusion

The NPCI’s new guidelines on UPI-linked credit lines represent a major leap in digital financial flexibility for Indian consumers. By allowing loans secured against FDs, gold, property, and more to be accessed via UPI, the system removes friction in borrowing and empowers individuals and businesses with on-demand liquidity.

As the August 31, 2025 deadline approaches, banks, app providers, and payment gateways are expected to roll out the required infrastructure. If you're someone with valuable financial assets or an existing loan account, it might be time to explore how you can unlock its value, one UPI transaction at a time.
 

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LoansJagat Team

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