RBI allows credit cards to be linked to the UPI platform; to get started with RuPay

On Wednesday, the Reserve Bank allowed credit cards to be linked to the Unified Payments Interface (UPI), which will allow more people to make payments using the popular platform.

Until now, only debit cards connected to savings bank accounts and current accounts were allowed to connect to the UPI platform.

Currently, UPI payments are free, while credit card companies generally depend on the merchant discount rate (MDR), which is charged on each use to make merchant payments as a source of revenue. .

“…the fundamental purpose of linking credit cards to UPI is to provide a customer (with) a wider choice of payments. Currently, UPI is linked via debit cards to accounts savings or current accounts,” Reserve Bank Deputy Governor T Rabi Sankar said. told reporters at the usual post-political press conference.

Earlier in the day, RBI Governor Shaktikanta Das announced that such a link would be possible from credit cards issued by the National Payments Corporation of India (NPCI) promoted by the RBI.

He said the new arrangement will be implemented after system developments and instructions will be issued to NPCI to that effect.

Das said the new arrangement should provide more options and convenience for customers to make payments through the UPI platform.

UPI has become the most inclusive payment method in India, with over 26 crore unique users and 5 crore merchants integrated on the platform, he added.

In May, 594.63 crore transactions worth Rs 10.40 lakh crore were processed through UPI, Das said.

To a specific question highlighting the differences between UPI and credit cards from the perspective of usage fees, and how they are exact opposites, Sankar said that going into the pricing structure of such a service in this moment would be tantamount to taking the leap.

“We will have to see how the pricing of this will work, because the pricing is something that the banks will have to do. The entities of the system will have to do it. At this point we will present the arrangement and the pricing, we will see how it goes” , Sankar said.

The Rupay network – touted as an indigenous alternative to global giants like Mastercard and Visa – has a low market share in the segment.

National rating agency Icra said allowing UPI-based payments on credit cards could result in shifting some initial spending from savings/checking accounts to credit cards, which could in turn lead to higher card usage levels and increased card spending for banks that operate a higher share of Rupay cards.

However, as credit cards issued by Rupay continue to gain market share, the overall outstanding credit card credit, which stood at Rs 1.5 lakh crore as of April 22, is not expected to increase by significantly in the short term, unless the improvement in UPI linking is also extended to other card platform operators, the agency said.

Industry players, however, hailed RBI’s move with AK Goel, the current chairman of industry lobby IBA, saying it will drive convenience and digitalization for customers.

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