IRDAI Allows Fund Blocking Via UPI For Insurance Premium Payments

The Insurance Regulatory and Development Authority of India (IRDAI) has permitted insurers to block funds in a customer’s bank account via UPI for premium payments for life and health insurance policies.

In a circular, the insurance regulator said that the payment option, called Bima-ASBA (Bima – Applications Supported by Blocked Amount), will be available from March 1, 2025. 

“Under the facility called the Bima Applications Supported by Blocked Amount (Bima-ASBA), the transfer of money from the prospect to the insurer happens only when an insurance policy is issued. In this facility, insurers can offer a one-time mandate for blocking a certain amount through UPI in the bank account for the concerned prospect,” the circular said.

With this new system, instead of paying the premium straight away, customers will be able to block the required amount in their bank accounts through UPI. 

The premium amount would be debited only if the customer approves it. If the policy is rejected, or the customer decides to cancel the application, the money will be unblocked in the customer’s account.

The new system will be available to all individual policyholders and is entirely optional. Customers can still apply for insurance without using Bima-ASBA if they prefer.

“This service is useful where the customer prefers to authorise a block on the funds without immediate debits,” IRDAI said in the circular.

The insurance regulator has asked insurance companies to partner with multiple banks and put appropriate processes in place for Bima-ASBA. It also said that no additional charges should be levied on the insurer for this payment prospect.

It is pertinent to note that UPI-based ASBA facility is already available in the equities market for initial public offerings (IPOs).

The latest development comes at a time when the UPI adoption continues to rise in the country. To give a further boost to this, the Reserve Bank of India (RBI) recently allowed small finance banks (SFBs) to offer pre-sanctioned credit lines via UPI.

According to the National Payments Corporation of India (NPCI), the number of UPI transactions rose 1.5% month-on-month to 1,699 Cr last month. The January transactions amounted to INR 23.48 Lakh Cr as against INR 23.25 Lakh Cr in December 2024.