RBI to allow UPI payments via RuPay credit card: What this means for customers, what experts say

The Reserve Bank on Wednesday announced that it will allow credit cards to be linked with the unified payments interface (UPI). RBI governor Shaktikanta Das, making the announcement, said this would begin with RuPay credit cards issued by the RBI-promoted National Payments Corporation of India (NPCI). Let’s take a look at what will change, what experts say and what questions remain.

What will change?Until now, UPI, which is also managed by NPCI, allowed transactions by linking users’ debit cards to their savings or current accounts. That will now change. As per the Central bank, this will enable more people to make payments using the popular platform.

UPI has become the most inclusive mode of payment in India, with over 26 crore unique users and 5 crore merchants onboarded on the platform, Das said. He added that the new arrangement is expected to provide more avenues and convenience to the customers in making payments through the UPI platform. In May, 594.

63 crore transactions amounting to Rs 10. 40 lakh crore were processed through UPI, Das said. The interoperability of prepaid payment instruments (PPIs) has also facilitated access of PPIs to the UPI payment system for undertaking transactions, Das said.

What do experts say?Experts seem bullish on the move. As per Indian Express, experts believe that given widespread use of UPI, the linkage of UPI and credit cards could possibly result in credit card usage increasing in India. The integration also opens up avenues to build credit on UPI through credit cards in India, where , in the last few years, a number of startups like Slice, Uni, One etc.

have emerged. The move could also be a push to increase adoption by banking on UPI’s large user base, the newspaper said. Speaking to News18, Vivek Bansal, Group CFO of InCred said RBI has signalled increasing usage of UPI by adding credit cards which hopefully will further increase UPI penetration and digital payments overall.

”Ramesh Narasimhan, CEO, Worldline India, praised the RBI’s move. “In order to further deepen the reach and usage of UPI while keeping consumer preference at the epicenter, the RBI has offered an innovative solution to permit the linking of credit cards on to UPI platform. This will not only encourage consumers to continue making payments via UPI but also provide the benefit of short-term credit that credit cards extend,” he told News18.

Questions remainHowever, questions about Merchant Discount Rate linger. As per Moneycontrol, the merchant per transaction pays a certain percentage of the amount which is then divided among the banks and payment service providers. As of 1 January 2020, UPI and RuPay debit cards attract zero-MDR, meaning no charges are applied to these transactions.

This is one of the key reasons for the widespread adoption of UPI by merchants across the country, as per the report. Meanwhile, credit cards attract the highest MDR — between two and three percent. Further, credit cards also attract higher security measures including two-factor authentication, which may be difficult to implement for UPI transactions, as per the report.

During the press conference after the MPC statement, RBI deputy governor T Rabi Shankar said that the central bank has laid the foundation and the pricing will be decided later in consultation with banks. “Basic objective of linking credit cards to UPI is to provide customers with wider choice of payments. Currently UPI is linked to debit cards and savings bank accounts only, but now it will be linked to credit cards as well.

We will introduce the arrangement of credit card linkage with UPI, and see how the pricing goes,” Shankar said, as per News18. The Union Cabinet chaired by Prime Minister Narendra Modi had in 2021 approved an incentive scheme to promote RuPay debit cards and low-value (up to Rs 2,000) BHIM-UPI transactions in the country. Under the scheme, the acquiring banks will be incentivised by the government, by way of paying percentage of value of transactions (P2M) done through RuPay Debit cards and low-value BHIM-UPI modes of payments, at an estimated financial outlay of Rs 1,300 crore for a period of one year, with effect from April 1, 2021.

With inputs from agenciesRead all the Latest News, Trending News, Cricket News, Bollywood News, India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram. .