Can NPCI fix the tangled mess of credit on UPI?

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Editor's note: The Unified Payments Interface, or UPI, run by the National Payments Corporation of India, is widely hailed as one of the biggest innovations in public financial infrastructure in the world. For good reason—NPCI’s instant bank-to-bank transfer system is the most popular payment method in the country, with more than 3.2 billion transactions in the month of July this year. One of the promises of “UPI 2.0”, launched with much fanfare three years ago in August 2018, was a way to add credit as a capability on UPI. Lending lies at the core of most fintech business models and UPI was already the foundation on which many fintech startups had built their services. Marrying the two seemed perfect. Cut to today, and we find that credit functionality of UPI never quite played out. But at the same time, startups have hacked their way around the regulations to combine credit lines with UPI—something that has angered both NPCI and the Reserve Bank of India.   Last month, NPCI asked several fintech startups and BNPL (“buy now pay later”) companies to re-engineer their products …