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RBI allows UPI payment via credit cards


RBI allows UPI payment via credit cards


What's the rule now?

UPI facilitates transactions by linking savings or current accounts through users' debit cards.
What's the news now?
In a major shift in how the Unified Payments Interface (UPI) functions, the Reserve Bank of India (RBI) today said that credit cards too will be allowed to be linked to the UPI accounts.
The implementation will begin with the indigenous RuPay credit cards being allowed to be linked, followed by other card networks such as Visa and Mastercard.
"This will provide additional convenience to the users and enhance the scope of digital payments," the governor said.
About RuPay Card

RuPay, the card network by the National Payments Corporation of India (NPCI), managed to capture a 60 percent share of India's car market in 2020, as per data released by the RBI.
Need some clarification
It is still not clear how the Merchant Discount Rate (MDR) will be applied to UPI transactions are done using credit cards.
For each transaction, the merchant pays a certain percentage of the transaction amount which is then divided among the banks and payment service providers.
According to a norm that came into effect on January 1, 2020, UPI and RuPay 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.

UPI Achievements
UPI made up 60 percent of overall retail digital payments in India in FY22, a year in which the payments system breached the $i-trillion mark in transaction values, a watershed moment.
In his statement, Das said that UPI currently has 26 crore unique users and 5 crore merchants on its platform.
In May 2022, 594.63 crore transactions amounting to Rs 10.40 lakh crore were processed through UPI, up from 558 crores in April.
Credit cards on the other hand attract the highest MDR between two and three percent. Clarity will be needed on whether MDR will have to be let go for transactions done using credit cards linked to UPI.
Further, credit cards also attract higher security measures including two-factor authentication, which may be difficult to implement for UPI transactions.



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