Linking Of UPI With Credit Card Likely To Begin In Two Months: NPCI CEO

The National Payments Corporation of India (NPCI) is likely to operationalise linking of RuPay credit cards with the Unified Payments Interface (UPI) in the next two months.

“We are hoping that the RuPay credit card linking to UPI should get operationalised in couple of months’ time. We are talking to BoB Cards, SBI Cards, Axis Bank, and Union Bank of India,” NPCI MD and CEO Dilip Asbe said at an event. “We should be in a position to submit our proposal to the Reserve Bank of India (RBI) in 10 days.”

UPI, launched by the NPCI in 2016, currently allows users to link bank accounts that are linked to a mobile number. Using various third-party apps such as Google Pay, PhonePe, among others, users can make payments through their debit cards. 

Last month, the Reserve Bank of India revealed plans to allow linking credit cards with UPI.

“To start with, RuPay credit cards will be enabled with this facility,” the central bank said in June.

As per another report by The Indian Express, the NPCI is in talks with public sector card companies to begin a pilot project by the end of August or September.

As part of the pilot, the NPCI is also looking to integrate UPI AutoPay feature with credit cards in order to reduce the risk of defaults on credit card payments, the report said.

“Today, banks cannot issue a physical credit card to someone with a smaller credit limit because of the cost of issuance involved. That’s why the digital approach is necessary. With the UPI AutoPay, it adds a lot of value. With this the distribution and collection costs come to near zero. Technically, banks can do step-up credit once they understand consumer behaviour, and expand their base,” an NPCI official was quoted as saying.

According to experts, linking credit cards with UPI would further boost UPI payments in the country and lead to higher utilisation of credit cards. However, it is not clear if the merchant discount rate (MDR) would be charged for the usage of credit cards through UPI.

“We may have to take care of the smaller merchants and protect them from the MDR. The existing credit card servicing merchants can continue to pay,” Asbe said at the event, 

For the uninitiated, all merchants processing transactions across digital payment systems used to levy MDR charges earlier. The MDR on UPI and RuPay debit cards was waived off in January 2020 with an aim to further boost the adoption of digital payments by small merchants.

However, the MDR rate for credit cards is at 2%-3%, and MDR has been one of the most important means to earn money for credit card issuers. 

“The objective is how we can go back to the 250 Mn users and how the bank can start doing smaller credits. Also, we are looking at how the 50 Mn merchants can start accepting credit,” Asbe added.

Meanwhile, India is also mulling providing UPI to other countries. Speaking at an event earlier this month, IT Minister Ashwini Vaishnaw said that India is already in talks with 30 countries for UPI, while three countries have signed memoranda of understanding (MoUs).

UPI transactions in the country stood at INR 10.14 Lakh Cr in June, a slight drop from INR 10.4 Lakh Cr in May.