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“If we use other cards, the earnings from them go to foreign countries, but in case of RuPay all transactions stay in India.” – Indian Prime Minister Narendra Modi, 2018

Cut to 2020. Once the poster child of the government’s ‘Digital India’ initiative, card network service RuPay is now being discriminated against by banks. Last month, a study a study Indian Institute of Technology Bombay Banks have deliberately moved away from RuPay and promote a card scheme which generates more revenue for them. Read more by Ashish Das, a professor from India’s premier engineering college, Indian Institute of Technology (IIT) Bombay, concluded that banks have no interest in issuing the Indian alternative over American card network giants Visa and Mastercard.

Ironically, the reason also stems from the government.

In its quest to push more digital payments, the government slashed the Merchant Discount Rate (MDR) and interchange fee for RuPay debit cards to zero earlier this year. That was the one incentive for banks to push for RuPay adoption.

“They [the government] are shooting themselves in the foot,” said a former senior executive at RuPay. The cost of issuing cards, card swiping machines (POS), and network charges are all borne through MDR and interchange fees. Zero-MDR and interchange means banks now earn nothing for processing transactions.

The quasi-government body quasi-government body The Ken Depending on the time and context, NPCI is a competitor. It is a platform. It is a regulator. It is an industry association. It is a profitable non-profit. It is a rule maker. It is a judge. It is a bystander. Read more  that runs RuPay—National Payments Corporation of India or NPCI—has been left with no choice but to comply with the new regulations.

Despite issuing about 600 million debit cards over the last decade in a country that was largely unbanked, the Indian financial system is yet to see yet to see Business Standard India is next only to China in terms of the cash. However, the percentage of cash withdrawals to GDP has been constant in India at around 17 per cent Read more  a decline in the usage of cash. And RuPay, which had a high-flying decade with 58% market share as of 2019, is now having some sort of a mid-life crisis.

RuPay rode on the flagship government projects like Prime Minister’s Jan Dhan Yojana (PMJDY) that gave about 300 million people access to bank accounts and debit cards for the first time. This made the card network the largest in terms of the number of cards issued in the country.


Pranav Balakrishnan

Pranav writes about the business of moving people and things around, i.e, mobility and e-commerce. Over the past two years, he has written about Ola, Tesla, Flipkart, Amazon, and the increasing role played by Reliance Industries in the Indian technology story. Pranav joined The Ken from Asian College of Journalism, Chennai, specialising in business journalism.

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