BIG UPI Update: UPI Users Can Now Easily Withdraw Loan Amount by Linking Credit Lines – July 2025

July 2025 marks a major milestone for India’s fast-growing digital payments ecosystem. In a groundbreaking development, the National Payments Corporation of India (NPCI) has authorized UPI (Unified Payments Interface) users to withdraw funds directly from their pre-approved loan accounts and credit lines. This means your UPI app—whether it’s PhonePe, Paytm, Google Pay, or others—can now help you access loan amounts in a few taps, completely changing the way Indians tap into credit.

What’s Changing for UPI Users?

Until now, UPI allowed only specific merchant or P2M (person-to-merchant) payments using credit. With the latest update (effective August 31, 2025), users can now:

• Make cash withdrawals from linked loan and overdraft accounts

• Send money directly from loan-linked accounts (P2P)

• Pay merchants of any size, including small businesses, with credit funds

• Use loans sanctioned against assets like fixed deposits, gold, shares, and property directly for daily payments

• UPI loan withdrawal

Example: If you had a loan sanctioned against your FD or gold, you can now use UPI to:

• Withdraw cash at ATMs or partner outlets

• Pay medical or tuition bills

• Settle vendor dues for your business

How Does This Work?

After the NPCI’s July 2025 guidelines, the process has been simplified:

• Link your pre-approved credit line or loan account (personal, business, or secured) in your preferred UPI app.

• Upon transaction, simply select the credit line instead of your savings account.

• Authorize the transaction as usual; the amount is instantly debited from your loan balance.

This covers funds sanctioned by banks or lenders and secured against assets:

• Fixed Deposits (FD)

• Shares & Bonds

• Gold

• Real Estate

• Existing Overdrafts

The key advantage is instant and seamless access to funds, fully integrated into the day-to-day payment and transfer experience you already have with UPI apps.

Key Benefits for UPI Users

1. Faster Access to Credit:
Quickly use approved loan amounts without lengthy branch visits or withdrawal forms.

2. Flexible Payments:
Withdraw cash, pay bills, shop online or in-store, pay service providers, all using the loan facility.

3. Better Management:
View, track, and repay your loan transactions in real time on UPI apps.

4. Wider Acceptance:
Your credit line can be used at any UPI merchant, not just select partners. Even small kirana stores (with <₹50,000 UPI transactions/month) are now included.

5. Business Empowerment:
Small business owners can directly pay salaries, vendors, or running expenses via the UPI-linked business overdraft.

Security & Guidelines

• Purpose Restriction: You must use the loan as per lender approval (e.g., education, business, specific asset-backed loan).

• Limits & Approvals: Each bank may set specific daily, per-transaction, or overall withdrawal limits.

• NPCI Monitoring: Every transaction is closely monitored for compliance, safeguarding against misuse.

Who Can Use This Feature?

You’re eligible if:

• You already hold a pre-approved loan, overdraft, or secured credit line with a participating bank or financial institution.

• Your UPI app and bank have integrated this update (all major banks and payment service providers are expected to be ready before August 31, 2025).

• Your KYC is updated as per RBI and NPCI standards.

How to Activate UPI Loan Withdrawal

1. Update Your App: Ensure you have the latest version of apps like PhonePe, Paytm, or Google Pay.

2. Go to Linked Accounts: In your UPI app, choose ‘Link New Account’ > select ‘Loan/Credit Line’.

3. Authenticate: Complete bank-verification, including OTP or biometric as required.

4. Ready to Use: Your loan account now appears as a payment option.

Tip: For any issues, contact your bank or app’s customer care for guidance on linking and using new credit facilities.

What Does This Mean for India’s Fintech Ecosystem?

• Financial Inclusion: This move bridges the gap for millions who need quick access to credit for emergencies, medical bills, or working capital without complicated paperwork.

• Digital Lending Boom: Banks and fintechs can now offer easier, regulated credit solutions to both urban and rural customers.

• Cashless Society Boost: By integrating credit with everyday payments, UPI cements its role at the heart of India’s cashless transformation.