The Reserve Bank of India said it will allow the linking of credit cards to the UPI platforms. In the initial phase, only the RuPay credit cards will be linked to the UPI platform, the central bank said. The move will increase the credit card underwriting infrastructure as merchants can accept credit cards with UPI.
While linking the Unified Payments Interface (UPI) to RuPay credit cards is seen as an advantage by major stakeholders, more clarity is needed on some of the operational aspects, industry people said.
While the merchant discount rate (MDR) is levied by banks on merchants for card transactions on POS machines, MDR fees on UPI transactions are abolished. “The price is something that is not yet known. How MDR will turn out, how they can charge is yet to be clarified,” said Dewang Nerlla, CEO of NTT DATA Payment Services India, a payment aggregator. Regulatory clarity on the issue of MDR is very important for the entire payment ecosystem, he added.
According to Aashay Choksey, Assistant Vice President – Financial Sector Ratings, ICRA, the move could lead to a shift to credit cards, which in turn could lead to higher card usage levels and higher spending per card for banks with a larger share of RuPay. -Cards.
However, as RuPay-issued credit cards continue to gain market share, the total credit card credit outstanding, which stood at approximately Rs 1.5 trillion on April 22, is unlikely to grow significantly in the near term unless the improvement in UPI peg is extended. also for other card platform operators,” he said.
Because more clarity is needed on the subject, it is not possible to comment on the matter, a bank spokesman said. An email to Bank of India yielded no response. “This is a welcome move that will help customers get the best of both worlds: payments and credit. This is expected to boost spending in the economy and is a very forward-looking step to improve the fiscal economy,” said Shailendra Singh, MD & CEO of BOB Financial Solutions.
The move aims to provide additional convenience to users and expand the scope of digital payments, the RBI said. “UPI has already proven its worth through its widespread adoption, and providing the same ease of access to credit could be a turning point for credit penetration in India. Today, UPI is practically ubiquitous and I have no doubt that UPI-backed credit cards will drive the next phase of credit-backed growth,” said Gaurav Chopra, CEO of online credit marketplace platform IndiaLends.
UPI trades hit record highs in May as the platform doubled the trade value to Rs 10 trillion during the month.