In a move that will enable credit card payment for micro transactions with kirana stores and hawkers, the RBI has said that it will enable credit card payments using the UPI platform. Initially, only RuPay credit cards will be enabled with this facility.
“The basic objective of linking credit cards to UPI is to provide the customer a wider choice of payments. Currently, UPI is linked through debit cards to savings or current accounts, and now this can be linked to credit card accounts that banks issue,” RBI deputy governor T Rabi Sankar said.
According to RBI governor Shaktikanta Das, UPI has become India’s most inclusive mode of payment. Over 26 crore unique users and five crore merchants are on the UPI platform. In May 2022 alone, the UPI platform processed 594.6 crore transactions worth Rs 10.4 lakh crore. UPI currently facilitates transactions by linking savings and current accounts through users’ debit cards. Also in the works is linking wallets to UPI. As against this, there are 7.5 crore credit cards and over 61 lakh credit card swipe machines.
Visa is already working with Paytm to facilitate the acceptance of credit card payments using the latter’s QR code acceptance network. The issue that remains to be addressed is fixing the merchant discount rate, or the fees that the shopkeeper pays to the bank for facilitating credit card payments. Sankar said that the pricing of the transactions is yet to be finalised.
However, bankers point out that for smaller retailers, the 2% MDR is not the issue and it is primarily the infrastructure cost that is the inhibiting factor. Bankers say it would be a preferred way of providing credit rather than maintaining a tab for every customer who opts to pay later.