RuPay Credit Cards Will Be Linked to UPI Platform in a Few Months: NPCI MD

With cash usage continuing to remain high despite a jump in online payments, a top NPCI official on Friday said currency in circulation will reduce only when a third of the population starts using digital payment alternatives.

National Payments Corporation of India (NPCI) Managing Director and Chief Executive Officer Dilip Asbe said that right now, the overall universe of people using services like the Unified Payments Interface (UPI) is 250 million or about a fifth of the population.

"... unless we see one-third of the population on both demand and supply side having the digital payment structure, it is very difficult to start seeing some reduction in cash in circulation," Asbe said while speaking at an event organised by Bank of Baroda.

Given the current growth, he said it will take between 12 and 18 months for the reduction in cash in circulation.

For the last many months, high Currency in Circulation (CIC) has been baffling industry watchers since official data has been showing a spike in digital payments through mediums such as UPI.

CIC has risen to over 14 percent of GDP as against 12 percent in 2016 during demonetisation.

Asbe explained that it is a "complex situation", and pointed out that despite the payments into people's bank accounts under the direct benefit transfer scheme, people cash out from the Automated Teller Machines (ATMs). Moreover, 'rolling cash' has also increased as seen at ATMs and point of sale transactions' average ticket sizes.

In developed countries, he said, CIC as a percentage of GDP is in single digits, and given all the efforts and awareness campaigns, "we should aim for the CIC to reduce to single digits in the next five years".

Asbe said there will be ten times growth in the transaction volumes and Indians will be executing a billion digital payments transaction in a day.

He also said that in the next couple of months, RuPay credit cards will be linked to the UPI platform.

NPCI is in talks with SBI Cards, BoB Cards, Axis Bank and Union Bank of India for the same and will submit a proposal to the Reserve Bank of India (RBI) to take forward the policy announcement on the UPI front.

"We might have to take care of the smaller merchants and protect them from the MDR (Merchant Discount Rate) while the existing credit card servicing merchants can continue to pay," he said.

UPI transactions, which were carried out till now linked to saving bank accounts, are free by mandate while the credit card players are allowed to charge up to 2 percent of a transaction as MDR which is to be paid by merchants.

Asbe said NPCI is in talks with over 30 countries from an internationalisation of UPI perspective, which includes both helping countries create their own payments networks and also making cross-country payments easier using the platform.