RuPay credit card transactions over UPI are now permitted by the RBI

On Wednesday, the Reserve Bank of India (RBI) allowed RuPay credit cards to connect to the UPI network, a move which experts say has the potential to boost the credit market fivefold.

While the current estimate for those taking instant loans is around 50 million, authorizing credit card transactions through the UPI interface will give nearly all of UPI's 250 million users a access to these loans.

“The fundamental purpose of linking credit cards to UPI is to give customers more payment options,” said T Rabi Sankar, Deputy Governor of RBI. "Currently, UPI is connected through debit cards and bank accounts. Now you can also link your credit cards, which improves travel. We'll have to see how prices change over time."

       First, the regulator made this service available through RuPay credit cards.

"Allowing UPI-based payments on credit cards could shift some of the up-front spending from checking/savings accounts to credit cards, which in turn could lead to increased card usage. and increased card spending for banks with a higher share of RuPay cards," said Aashay Choksey, assistant vice president for financial sector ratings at ratings agency ICRA. "However, as cards from credit issued by RuPay continue to gain market share, they are unlikely to grow significantly in the near future unless improved UPI links spread to other platform operators Cards." .

Anuj Kacker, co-founder of Freo, a credit-based neobank, said: "We believe that with the added layer of an UPI-linked credit card, customers who did not have access to a credit card previously can experience a 30-day interest-free loan will now secure this and thus expand the scope of digital payments.

UPI has the most comprehensive payment method in the country, with over 260 million unique users and 50 million merchants on board the platform. In May, the platform processed nearly 5.95 billion transactions worth 10.40 lakhcrore.

The yield of the UPI-based payment has more than doubled from Rs 41.04 lakh crore in FY21 to Rs 84.16 lakh crore in FY21-22. Total credit card outstanding as of April 22, 2022 is nearly Rs 1.5 crore.

"Credit cards serve two main purposes: convenient payments and short-term liquidity, so it's a logical move," said Gaurav Chopra, CEO of IndiaLends, an online marketplace for lending products. . "UPI has already proven its worth through widespread adoption, and providing the same convenience of accessing credit can be a game-changer for credit penetration in India."


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