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Also, it will encourage faster access to credit for MSMEs, said Jyoti Prakash Gadia, managing director of corporate financial advisory firm Resurgent India. It will reduce the time to access credit online as it involves documentation, KYC, branch visits and other related requirements for MSMEs. Moreover, it can be added to the collection of other information on the basis of credit history to improve the system of obtaining loans.
A pre-approved line of credit is basically a loan that a lender has already approved for its customer to withdraw and use. The Reserve Bank’s announcement comes days after the National Payments Corporation of India (NPCI) in a circular proposed an interchange fee of up to 1.1 per cent (of transaction value) on transactions up to Rs 2,000 through UPI through prepaid payment instruments (PPIs) such as e-wallets and gift cards from April 1, 2023.
This was similar to the merchant discount rate charged to a merchant for processing payments made by customers using debit or credit cards. Interchange fees refer to the cost of receiving and processing a transaction. Last month, NPCI had announced that it will collaborate with various payment aggregators such as BharatPay, Cashfree Payment, Google Pay, RazerPay, Paytm, PayU and PineLabs to enable merchant transactions through RuPay credit cards on UPI. Earlier, UPI customers could only transact through their bank accounts, overdraft accounts and prepaid accounts. NPCI has clarified that customers will no longer need to carry credit cards for making payments.
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The schemes of RBI and NPCI gain significance in the context of a credit gap of around Rs 20-25 lakh crore in the MSME sector. RBI Deputy Governor M. Rajeswara Rao recently said.
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