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Indian government is forcing PSUs to issue RuPay cards

rupayIndian government has asked Public Sector Banks to issue separate RuPay debit cards to its customers and set up more terminals that accept this card scheme, reports The Economic Times. RuPay is a card scheme that was launched by National Payments Corporation of India (NPCI) in 2012 and was dedicated to the nation by the President earlier this year (pdf).

The government has not asked PSUs to stop issuing cards processed by Visa or Mastercard, but it has asked them to focus more on RuPay going forward. According to the report, 20 million RuPay cards have been issued to date. These cards work in most ATMs and can be used at 10.35 lakh point of sale (POS) terminals in India.

‘RuPay is cheaper for banks’: Most of these cards were issued by private banks till now. According to a report by Business Standard, only one private sector bank has issued RuPay cards until now. Most of these private banks have long-term deals with Visa and Mastercard which makes it difficult for them to add support for RuPay. PSUs on the other hand do not face this issue and this could be the reason why the government is exerting pressure on them to issue RuPay cards.

In the interview with Business Standard, NPCI managing director and chief executive officer AP Hota says that SBI had started paying back the money it had received from Visa and Mastercard and is shifting to RuPay as the Indian format will cost them just one-third in the long run. It is worth noting that SBI is the largest bank in the country and it has a card base of over 180 million.

Tie-up with Discover: NPCI is also trying to take RuPay international in association with Discover. In those markets too it will compete against Visa and Mastercard on the basis of cost advantage. However, RuPay operates only in the debit card market and is not involved in the credit card market as of now. It also plans to launch co-branded cards with Discover for Indians who want to shop from international e-commerce sites.

How does this help consumers?: RuPay charges about 0.01% transaction fee and claims that it will allow Indian banks to save on foreign currency as the fees to international payment companies will be paid in rupees instead of dollars. Debit card transaction fee is not very high for consumers in India to begin with, so it might not make a substantial difference to a regular account holder. On the other hand, having multiple cards can be a problem for consumers who will now have to remember multiple pins for the same account, depending on which card is being used.

NPCI had said that it will tie-up with more than 100 merchant websites across multiple categories in the e-commerce sector in 2013. However, not all e-commerce websites support RuPay yet, despite support from payment gateways such as CCAvenue.

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