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Home / Money / Personal Finance /  RBI allows UPI payment via credit cards. What does it mean for you?
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To deepen the usage of digital payments via UPI (Unified Payments Interface), the Reserve Bank of India proposed to allow the linking of credit cards to the UPI platform. To start with, only Rupay credit cards will be enabled with this facility. Industry experts believe that this move by the RBI will widen the scope of UPI payments significantly. The facility may be made available for Mastercard and Visa cards, going ahead. 

“The move by RBI simplifies the payment process to consumers because it allows various payment methods from a single payment app," said Adhil Shetty, CEO, of BankBazaar.com. When you have multiple accounts linked with one UPI, you can select the account from which you want to make each payment. You can benefit from the interest free period on your credit card-linked UPI transactions, provided you pay your credit card bills on time. This period can stretch up to 6 weeks. You also generally get cashbacks or reward points on credit card spending and this may apply to UPI-linked credit card spending also. Note that the facility of linking the Rupay credit card to the UPI would be available only after the required infrastructure developments are made.  

P2P transactions  

UPI transactions are divided into two categories - person-to-merchant (P2M) and peer-to-peer (P2P). As the names suggest, the former includes money transfers between people and merchants (payments), while the latter deals with the money transfer between people. So far, credit card payments are significantly used only for payments to merchants and not for inter-bank money transfer between two people. It is unclear whether such P2P UPI transfers can be done through a credit card-linked UPI payment under the RBI proposals.  “Merchant UPI IDs are different from personal UPI IDs, So, it is not difficult to be distinguish between P2P payments and P2M payments. Having said that, it is also technically possible to allow P2P transactions through UPI via credit cards," added Shetty from BankBazaar.com 

Anuj Kacker, Co-Founder and COO, Freo has another view. “There is also a possibility that P2P transactions will be locked and only P2M payments be allowed using a credit card through UPI. But we have to wait for the final document from NPCI (National Payments Corporation of India) in this regard," Kacker added. Nevertheless, users must be cautious and limit themselves from over-utilising the leverage offered by credit cards. 

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