By Mike Barret 
When you download a lending app and it asks to link your UPI account, a little suspicion is healthy. Not every permission request on your phone is justified, and some of them have nothing to do with processing your loan. Knowing what’s actually necessary and what’s overreach can save you from handing over more of your digital life than you intended.
Why loan apps want UPI access in the first place
The logic is straightforward. If you borrow money through an app, the lender needs a way to disburse the loan and collect repayments. UPI has become the default rail for both. Linking your UPI ID or bank account lets the app push funds to you and set up auto-debit mandates for EMIs. From the lender’s perspective, this is efficient. From yours, it means giving a third-party app a direct channel to your bank account.
The Reserve Bank of India’s digital lending guidelines, revised in 2022, have stated that loan disbursals must be directly made to the borrower’s bank account and not to a third-party wallet or pass-through. So when an app asks to link your UPI, it’s partly complying with regulation. But the specific permissions it requests on your phone while doing so are a separate matter entirely.
The permissions that are actually necessary
To link your UPI account, an app legitimately needs a few things. First, it needs your phone number, because UPI registration is tied to your mobile number registered with your bank. Second, it needs SMS read access, but only to auto-read the OTP sent during UPI registration or transaction verification. Third, it needs internet access, which is so basic it barely counts.
That’s roughly it for the UPI linking process itself. If the app uses the NPCI’s UPI infrastructure through a payment service provider (PSP) licence, the actual UPI PIN entry and authentication happen within a secure library provided by NPCI. The loan app doesn’t need to see your PIN, store your PIN, or have access to your full SMS history to make this work.
Some apps also request device identity permissions (like reading your IMEI or phone state) to detect if you’re using the same device that was registered. This is a fraud-prevention measure and is generally reasonable, though it’s worth knowing that this data can also be used for tracking.
The permissions you should question
Here’s where things get murky. Many lending apps, especially the smaller or less regulated ones, ask for permissions that have zero relevance to UPI linking or loan processing. Contact list access is the most common offender. A loan app does not need your contacts to disburse a loan or set up UPI auto-debit. The reason some apps want your contacts is for aggressive recovery tactics, where agents call your friends and family if you miss a payment. The RBI has explicitly flagged this practice as unacceptable.
Camera and storage access requests also need to be examined. If the app needs to upload a KYC document, camera access for that time makes sense. Blanket access to your photo gallery or file storage is not. Similarly, location access might make sense for a one-time verification during onboarding, but persistent background location tracking is excessive for a lending product.
The worst offenders ask for accessibility service permissions or device administrator access. No legitimate loan app needs either of these. Accessibility permissions can let an app read everything on your screen, and device administrator access can lock your phone. If you see these requests, uninstall the app immediately.
What RBI guidelines say about this
The RBI’s digital lending framework, formalised through directions issued in September 2022, puts specific limits on data collection. Regulated entities and their apps should collect need-based data with explicit borrower consent and clear audit trail. The guidelines state that data collected must have a defined purpose, and a retention limit.
Enforcement is patchy in practice. Apps linked with NBFCs or banks regulated by the RBI are likely to adhere to stricter norms. Unregulated apps, especially those operating through murky offshore structures, routinely thumb their noses at these rules. If a loan app is not clearly linked to an RBI-registered lender, treat every permission request with a bit more caution.
How to protect yourself
Check the real lender before you give permissions. Every legitimate loan app must display the name of its NBFC or banking partner. Verify that entity on the RBI’s list of registered NBFCs, which is publicly available on the RBI website. If you can’t find the lender, don’t proceed.
Many phones let you grant permissions on a one-time basis for things like camera or location. Use that option instead of “Allow always.” App store policies already restrict which apps can request access to your SMS inbox and call log, limiting it mostly to your default messaging and dialler apps, so keep your phone’s operating system and app store updated to benefit from that protection.
Review the permissions already granted to any loan app you’ve installed. On most phones, go to Settings, then Apps, select the app, and check Permissions. Revoke anything that doesn’t make sense. If the app stops working after you revoke contact or storage access, that tells you something about how it was designed and whom it was designed to serve. The answer is probably not you.