RBI Governor Shaktikanta Das last month launched the Rupay credit card on the Unified Payments Interface (UPI) network. This action would almost certainly increase credit market access.
At the launch, the MDR and other charges were not announced, as RBI is yet to confirm the approach. In a recent circular, the RBI made it clear that using a RuPay credit card on the UPI interface is free for transactions up to Rs 2000. Rupay credit cards have been operational for approximately four years, and all major banks have been enabling and issuing incremental cards for retail and commercial customers.
A circular dated October 4th stated, “During credit card on-boarding on the apps, the device binding and UPI PIN setting process shall include and be constructed as customer consent for credit card enablement for all types of transactions.” It also added that for international transaction enablement, the existing process from the app would apply to credit cards.
The circular also noted that a Nil Merchant Discount Rate(MDR) would apply for this category of transactions for up to Rs 2,000. An MDR is charged to the merchant by the bank for accepting payment from their customers via debit or credit cards each time a card is used in their stores for payment. MDR is charged as a percent of the total transaction amount.
By integrating credit cards with UPI, the customer will have a wide variety of payment options. According to the circular, UPI apps will ensure complete transparency on all transactions made by customers using their credit cards. This will be done by means of easily available transaction history and a clear and visible UI at the time of making payments.
Card issuers and apps will communicate with the customer through appropriate notifications at each stage of the credit card lifecycle. This step will promote the indigenous payment gateway and help in improving the acceptance of RuPay cards. The user might need to maintain a separate mobile number for an add-on card.
Conclusion
RBI and NPCI are taking proactive and innovative measures to help users’ consumption by expanding the payment options available to them. The MDR exemption for up to Rs 2,000 is bound to help consumers a lot as the majority of UPI transactions happening in India are micro-transactions of an amount of no more than Rs 20.
As NPCI and RBI have been working proactively and innovatively to boost India’s Fintech development, these advancements in UPI network, especially MDR-free micro-transactions on the Rupay credit card, are bound to boost India’s credit market.
Now customers can benefit from the increased opportunity to use their credit cards, while merchants will benefit from the increase in consumption by being part of the credit ecosystem with the acceptance of credit cards using QR codes.
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