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- India
- Friday , April 19, 2024
- Last Published Sep 12, 2023, 6:48:32 PM
What’s The Motive Of RBI Behind Linking Credit Cards With UPI?
The Reserve Bank of India recently suggested of linking credit cards with UPI, i.e. Unified Payments Interface. RBI Governor Shaktikanta Das said that the integration would begin with the indigenous RuPay credit cards that he announced in his monetary policy speech on Wednesday. The RuPay network and India UPI payment are managed by the same organisation – the National Payments Corporation of India (NPCI). https://twitter.com/RBIsays/status/1534457398618132481
Importance of The Move
According to the industry experts, the Credit card UPI linking could result in credit card usage soaring in India, given UPI’s widespread adoption. The integration also opens up avenues to build credit on UPI through credit cards in India, where several startups like Slice, Uni, One, etc., have emerged in the last few years. The move could also push to increase adoption by banking on UPI’s large user base. So far, UPI could only be linked to debit cards and bank accounts. This will be called a UPI credit card.What Are the Possible Obstacles?
Some regulatory areas would have to be addressed before the linkage happens. For example, it is still not clear how the Merchant Discount Rate will be applied to UPI payment made through credit cards. The MDR is a fee that a merchant is charged by their issuing bank for accepting payments from their customers through credit and debit cards. According to the set standards that have been in effect since January 2020, no charges are applied to UPI and RuPay transactions, which is a crucial reason behind the prolific adoption of UPI by users and merchants. However, the norm has fronted force back from the payments industry, which has argued that it limits the aggregators’ ability to “invest in and maintain the financial infrastructure” of the payment ecosystem they have built. The applicability of zero-MDR on UPI could also be why other card networks such as Visa and Mastercard may not applaud the move of linking UPI to credit cards.The Dominance of UPI In The Indian Finance Market
RBI Governor Das said: “UPI has become the most inclusive mode of payment in India with over 26 crore unique users and five crore merchants on the platform. The progress of UPI in recent years has been unparalleled. Many other countries are engaged with us in adopting similar methods in their countries,” In May, UPI processed 5.95 billion transactions worth over Rs 10 trillion, marking a record since its launch in 2016. NPCI is looking to manage a billion transactions soon a day.
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