In an effort to further push the adoption of UPI (Unified Payments Interface), India’s apex bank has allowed customers to link their credit cards with UPI.
“In order to further deepen the reach and usage, it is proposed to allow linking of credit cards to UPI,” a press release on monetary policy review by the RBI said.
To start with, the RBI will enable RuPay credit card holders to link their account with UPI and start transacting with the same ease as they do with their debit cards.
“This arrangement is expected to provide more avenues and convenience to customers in making payments through the UPI platform,” the RBI said.
This facility is not yet operational and would be available for usage only after the required system development is complete. The RBI will issue necessary instructions to the National Payments Council of India (NPCI) separately on how to go about it.
Once the RBI instructs NPCI and discusses the modalities of credit card payments on UPI, the matter will be in the latter’s hands. As soon as the NPCI has the required system in place, it will reach out to banks and other stakeholders to get this started.
How it will affect consumers
Although credit card payments on UPI will be limited to RuPay credit card users initially, this is an unprecedented move by the RBI. This is the first time that credit card users will be able to make payments on UPI.
The maximum circulation of RuPay cards is in smaller towns and villages as a majority of RuPay cards were issued under PMJDY (Pradhan Mantri Jan-Dhan Yojna), a financial inclusion program.
There is a wide disparity between debit and credit card circulation in India. Till December 2021, there were 94 crore debit cards in circulation, towering over the credit card circulation that totalled to 6.9 crore.
So, it will be interesting to see the uptake of RuPay credit card payments on UPI.
What should merchants do?
Since this is just a press release by the RBI, it’s yet to be seen how it’s going to impact merchants.
In its press release, the RBI didn’t reveal whether merchants will have to bear any MDR charges for accepting credit card payments via UPI. While there is a 0% MDR on debit card payments over UPI, it’s unlikely that merchants will enjoy the same for credit card payments.
Since credit card payments attract about 2% MDR, the RBI might follow a similar fee structure for payments on UPI as well.
Whether there is an MDR involved or not, merchants must accept digital payments via UPI as it’s the fastest growing digital payment mode in India.
Apart from metro cities, its usage has reached smaller towns and villages as well, which makes it one the most inclusive digital payment modes in the country.
Currently, over 26 crore unique users and 5 crore merchants use the UPI platform.
According to the RBI, 594.63 crore transactions amounting to Rs 10.40 lakh crore were processed through UPI in May 2022.
Conclusion
Since UPI payments continue to grow at a rapid speed, it is extremely important that merchants who have not yet started accepting payments via UPI should start doing it now.
Accepting payments via UPI will ensure no customers are turned away due to the unavailability of one of the most important digital payment modes. Plus, merchants can save as much as Rs 97,700 every month by integrating with Paytm Payment Gateway as we charge 0% MDR on UPI and RuPay payments.
