Ashneer Grover has called RBI's decision to to allow credit cards be linked with the Unified Payments Interface (UPI), "a great move", but the Shark Tank India judge and former BharatPe co-founder has his reservations regarding merchant discount rate (MDR).
"Linking of credit card on UPI is a great move by RBI. Unfortunately it’ll be a non starter unless issuers, especially banks understand that merchants will not pay MDR. So there is no interchange to be made on UPI," Ashneer Grover tweeted.
"Merchants wouldn't want to pay for customer credit."
MDR is the fee shopkeepers and merchants pay in exchange for payment services provided by banks and service providers.
According to a norm that came into effect on January 1, 2020, UPI and RuPay debit cards attract zero-MDR, meaning no charges are applied to these transactions. It's one of the key reasons for the widespread adoption of UPI by merchants across the country.
On June 8, the central bank had announced that credit cards will be allowed to be linked to UPI. Prior to that, only a customer’s bank account and debit card could be linked to UPI for any transaction.
RBI Governor Shaktikanta Das had made the announcement in his monetary policy speech.
"UPI facilitates transactions by linking savings or current accounts through users' debit cards. It is now proposed to allow linking of credit cards on the UPI platform to begin with the RuPay credit cards will be linked to UPI," he said.
"This will provide additional convenience to the users and enhance the scope of digital payments."
While the RBI stated that implementation will begin with the linkage of RuPay cards followed by other card networks such as Visa and Mastercard, more clarity on MDR is awaited.
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