RuPay credit cards on UPI: Small merchants not to be charged for transactions up to Rs 2,000

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Small merchants will not be charged Merchant Discount Rate (MDR), interchange or other fees for transactions worth Rs 2,000 or lower done using RuPay credit cards through the Unified Payments Interface (UPI), the National Payments Corporation of India (NPCI) said on October 4.

"Acquirers shall categorize Small Offline Merchant as per the RBI circular dated December 6, 2017. Nil MDR (no interchange, PSP & app provider charges) shall apply for this category up to the transaction amount less than and equal to Rs 2,000," a circular issued by NPCI, which operates UPI, said.

The circular laid down guidelines to operationalise RuPay credit cards linked to UPI, further to which NPCI will use the learnings to scale up implementation and usage.

MDR is the fee that merchants are charged while accepting payments. Credit cards attract the highest MDR ranging between 1-2 percent of the transaction amount.

However, UPI, along with RuPay debit cards, do not attract any charges as per government norms. With a majority of UPI transactions being low value, eliminating charges for small merchants is an attempt by NPCI, banks as well as RBI to drive up credit card adoption for smaller transactions as well.

"Customers will benefit from the ease and the increased opportunity to use their credit cards. Merchants will benefit from the increase in consumption by being part of the credit ecosystem with acceptance of credit cards using asset lite QR codes," the circular read.

For transactions above Rs 2,000, existing interchange charges applicable on RuPay credit cards will be levied.  In addition to RuPay interchange, the acquirer shall also reimburse 8 basis points to the payment service and app provider each.

The initiative to link credit cards to UPI starting with RuPay was announced in June by RBI Governor Shaktikanta Das. The product was launched at the Global Fintech Fest in September.

Until now, only debit cards were allowed to be linked with UPI. With the linking of RuPay Credit Card on UPI, customers will have an additional option to use their credit cards, and merchants will benefit from the increase in consumption by being part of the credit ecosystem.

UPI accounts for a majority share of digital retail transactions in terms of volumes. In September, the payments system crossed Rs 11 lakh crore in value for the first time across 6780 million transactions.