The move to link credit cards with UPI

What are the primary motivations behind this move? Will the proposed linking increase the scope of the Unified Payments Interface?

The story so far: The Reserve Bank of India (RBI) has proposed to allow linking of credit cards with the Unified Payments Interface (UPI) platform. The move is part of the central bank's efforts to enhance the scope of UPI. While announcing the move, RBI Governor Shaktikanta Das stated that RuPay credit cards issued by the RBI-promoted National Payments Corporation of India (NPCI) will be enabled first, and will become available after system developments. The UPI, also managed by the NPCI, was first introduced in 2016.

The UPI has, over time, become a popular mode of payment in India with more than 26 crore unique users and five crore merchants on the platform. In May 2022, about 594 crore transactions amounting to ₹10.4 lakh crore were processed through the interface.

At present, the UPI facilitates transactions by linking savings/current accounts through users’ debit cards. It is now proposed to allow linking of credit cards on the UPI platform. This is intended to provide additional convenience to users and enhance the scope of digital payments.

This facility would be available after the required system development is complete. The RBI will issue necessary instructions to NPCI separately to facilitate the change. To begin with, the indigenous RuPay credit cards would be linked to the UPI platform. It is likely to be followed by other card networks such as Visa and MasterCard that would bring in more users.

The arrangement is expected to provide an additional avenue for payment to customers and hence enhance convenience. The linking of credit cards to UPI has been proposed to further deepen the reach and usage of credit cards.

It is expected to bolster transactions and acceptance at more merchant sites. People who generally prefer to pay by credit card so as to avail of a longer pay-back period or loans on credit-card outstanding, or who do not wish to touch their savings at the moment of purchase, can pay using credit cards via UPI.

Currently, many merchants do not have credit card point-of-sale (PoS) terminals especially in semi-urban and rural areas but a significant number do have the QR code-based UPI acceptance facility. Now, they too will be able to accept credit payments via UPI without needing a PoS device.