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What is RuPay card? Here's why PM Modi is launching it overseas

To keep the hassle-free cash withdrawal, banks introduced credit and debit cards for a paperless procedure to withdraw money from ATM machines and to get the ATM Card the applicant needs to apply it. These credit and debit cards are referred to as a type of Payment Gateway Card. These come in three types in India -- RuPay Card, Visa Card or MasterCard.

Madhu L Madhu L
New Delhi Updated on: August 28, 2019 15:46 IST
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What is RuPay card? Why PM Modi is launching it overseas?

Apart from signing 10 MoUs in his recent visit, PM Narendra Modi has also launched RuPay card in Bhutan. He is also set to launch the card in Bahrain and UAE in his during his upcoming visit to the middle east nations. Before getting into this, let us understand what RuPay card is? And how it is beneficial to a common man?

What is 'RuPay' card?

To keep the hassle-free cash withdrawal and avoid long queues at their branch offices, banks introduced credit and debit cards for a paperless procedure to withdraw money from ATM machines and to get the ATM Card, the applicant needs to apply it. These credit and debit cards are referred to as a type of Payment Gateway Cards. These come in three types in India -- RuPay Card, Visa Card or MasterCard.

Now, the RuPay Card is an indigenous card which works on ATMs and merchant outlets and helps in reducing cash transactions. It is India's own payment gateway. It was launched on March 20, 2012, by National Payments Corporation of India (NPCI). Its aim is to reduce the foreign gateways' monopoly.

Why 'RuPay' card was introduced despite having Visa and MasterCard?

Before RuPay Card, the domestic banks had no option but to tie up with Visa or MasterCard for connectivity between cardholders, merchants and issuing banks not just within the country, but across the globe in the absence of a domestic card. These foreign companies or American companies charge a high amount due to their overseas connectivity. Every transaction done using a debit or credit card issued by a domestic bank is routed through network switches owned by Visa or MasterCard, which are based outside the country. But Rupay eliminated the need for this connectivity. For clearing and settlement of each transaction, banks will have to pay 40 per cent lower fees in the RuPay platform compared to other international platforms.

The domestic system is meant to gradually replace payment settlement providers like MasterCard and Visa, which now control all payments and settlements that happen through cards. It facilitates electronic payment at all Indian banks and financial institutions. 

What was the need for 'RuPay' card?

The Reserve Bank of India or RBI stated in its vision paper, "The need for such a system arises from two major considerations (a) the high cost borne by the domestic banks for affiliation with international card associations in the absence of a domestic price setter (b) the connection with international card associations resulting in the need for routing even domestic transactions, which account for more than 90 percent of the total, through a switch located outside the country

Why 'RuPay' card is being launched in other countries?

As it is mentioned, RuPay cards are created for domestic use, cannot be used at international level transactions such as Visa or MasterCard. To make the RuPay cards functional in other than Indian payment gateways like ATMs, Point of Sales (POS) and online sales, the card is being launched in other countries as well.

What are the benefits of 'RuPay' card?

1. Banks will not have to pay joining fees to issue 'RuPay' card to their customers while for international cards like Visa and MasterCard, banks pay an entry fee to be a part of their network. 

2. As compared to other cards, RuPay cards are more secure because its operations are limited within India only. But using Visa Debit Card or MasterCard, the customer's data are processed internationally and hence the risk of data theft is high.

3. RuPay card is offered by the public sector, select private banks, rural and cooperative banks whereas Visa, MasterCard and others don’t include such small banks in their network.

4. The processing of 'RuPay' card is faster as compared to international cards as its data processing and verification happens in India only.

While unveiling the Rupay card in Rashtrapati Bhavan, the then president Pranab Mukherjee said that India is one of the few countries in the world to have its own card payment gateway. China has its Union Pay, the domestic real-time payment processing firm for Chinese banks. Discover, Dinner Club and American Express are a few other payment gateways.

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