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The Reserve Bank of India (RBI), on June 8th, 2022, has allowed consumers to link their credit cards with UPI (Unified Payments Interface) now. RBI Governor, Shaktikanta Das announced the linking of credit cards with the UPI platforms for transactions following the Monetary Policy Committee (MPC) meeting for the repo rate hike.

To begin, Das has announced that for the time being, UPI will be linked to indigenous RuPay credit cards. Das stated that “The Rupay credit cards will be linked to the UPI platform. This will provide additional convenience to users and enhance the scope of digital payments,”

With over 26 crore unique users and 5 crore merchants on the platform, UPI has become India’s most inclusive mode of payment. UPI processed approximately 594 crore transactions totaling Rs 10.4 lakh crore in May 2022 alone.

How will it benefit users?

It started with the linking of UPI platforms like GooglePay, PhonePay, RuPay, etc. to the bank accounts only. Later, consumers were allowed to make UPI transactions from their savings or current accounts through their debit cards too.

However, users will now be able to make UPI transactions using their credit cards as well. Amit Gupta, MD at SAG Infotech, a tax solutions provider firm, commented on the RBI’s move, saying, “Linking credit cards with UPI is a very good way to boost the economy, it means that every person who would want to do transactions even with no disposable income at the moment can purchase certain items of his desire, be it small grocery or everyday essentials, making citizens’ lives much more convenient.”

Weighing in, Kumar Shekhar, VP of Member Operations, Tide, a fintech company said, this new arrangement will offer added convenience to users and enable them to seamlessly track their spending. “But more than that it will boost India’s digital payment and e-wallet ecosystem while attracting more stringent security measures, such as two-factor authentication,”

Will merchants get benefits?

Furthermore, the RBI decided to increase the limits on e-Mandates on cards for recurring payments. Over 6.25 crore mandates and 3,400 international merchants have been registered under the RBI’s framework for processing e-mandate based recurring payments.

Speaking about the benefits this move brings in for merchants, Mandar Agashe, Founder and MD of Sarvatra Technologies says, “It will lead to a rise in acceptability at many merchants, people who ideally prefer to pay by credit card, can now easily do it through UPI. Today many merchants don’t have credit card Pos’s terminals, especially in semi-urban and rural areas but all these have UPI QR code-based acceptance- all such merchants will be able to accept credit payments via UPI.”

To further facilitate recurring payments like subscriptions, insurance premia, education fees, etc. of larger value under the framework, RBI has enhanced the ticket size limit from Rs 5,000 to Rs 15,000 per transaction.

Weighing in, Shekhar from Tide said, “Amidst this, it will also be interesting to watch the application of Merchant Discount Rate (MDR) to UPI transactions. As of now, RuPay and UPI have a zero MDR policy and the merchant does not have to pay any transaction amount.”

“However, credit cards work on a completely different model and have the highest MDR, he added.

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