Now, Purchase on EMIs Directly from PayTm, GPay, and PhonePe

NPCI LogoIf you have linked your RuPay credit card to your UPI app (Paytm, GPay, Phonepe), you would have noticed that you must pay in full. With UPI payments, you cannot buy on EMIs. However, going by a new NPCI circular (Introduction of New Features for Credit accounts) dated March 29, 2024, this is about to change from May 31, 2024. After this date, you will be able to buy on EMIs even when you are paying from your UPI app.

How Flexibility with UPI Payments Has Increased?

  • Earlier, you could make UPI payments only from your savings bank account. No credit allowed.
  • Then, you could get credit on UPI. You could link your RuPay credit cards to any UPI app. However, you must pay the RuPay credit card bill in full to avoid any charges/interest cost. Of course, you can log into your mobile banking app and convert transactions into EMIs. But you don’t have a concept of “Merchant EMI” if you are using RuPay credit card for UPI payments.
  • Now, as per the aforementioned NPCI circular, you will be able to purchase on EMIs at the time of transaction. Note that this option is available if you are purchasing using a credit account linked to UPI (Rupay Credit card, OD/credit line linked to UPI).

Let’s Consider a Payment Flow on Amazon App

  1. You add items to purchase to the cart.
  2. At the time of checkout, you get multiple payment options. Credit card, Debit Card, Net Banking, Cash on Delivery, Gift Card, and UPI.
  3. In this post, we are concerned only about credit card and UPI payments.
  4. If you select a credit card, you get an option to make a full payment or pay in EMIs (Merchant EMI). Sometimes, discounts and cashbacks may vary if you pay in EMIs. EMIs could be No-cost EMIs too. In case you opt for EMIs, the app shows you the EMI amount, tenure, and the rate of interest for the loan. Initially, your card will be charged for the full amount and the bank will convert your loan amount into EMIs after a few days. Hence, once you buy on EMIs, everything happens automatically.

emi payment option

  1. On the other hand, if you select UPI, you must pay in full. Well, if you are paying from your savings bank account, there is no question of credit. However, even if you are making payment from UPI linked credit product (such as RuPay Credit Card and Overdraft line linked to UPI), you must still pay in full at the time of purchase. No concept of buying on EMI. Hence, even though you are getting credit on UPI rails, there is no concept of Merchant EMIs or Instant EMI.
  2. With a RuPay credit card, you do not have to always make payments using UPI. You can go the regular credit card route too. As specified in (4), when you do that, you will have option to buy on EMIs.
  3. Even if you have used your RuPay credit card for UPI as in (5), you can always log into net banking website to convert your purchase into EMI.

This recent NPCI circular has changed (5). With this change, you will be able to buy on EMIs even for UPI payments. Of course, the EMI option shall be available only if you are making UPI payment from a credit instrument (RuPay credit card, Credit line on UPI).

What Are the Benefits of Purchasing on EMI for UPI Payments?

For online purchases, if you want to pay in installments, you can simply take the credit card route (instead of UPI) and avail EMI facility. Alternatively, even if use RuPay credit card for UPI payments, you can convert your purchase amount into EMIs later.

What are the benefits of this circular then? Two benefits.

Firstly, when you opt for EMI on merchant website, you may get a better deal in the form of a lower processing fee and lower interest rates. Your bank may charge a fixed processing fee (say Rs 199) in case on merchant EMI and a percentage fee (2% of purchase amount) when you convert the purchase amount into EMI later.

Secondly, EMI options (as we discussed above) are available only for online payments. You may use your RuPay credit card for UPI payments on physical retail outlets too. The NPCI circular opens up EMI options for UPI payments on retail outlets too.

How Will This Work?

As I understand, once these features go live after May 31, 2024, when you scan a QR code, you will get an option to pay in full or in EMIs. This option will show up in the UPI app and not on the merchant website.

If you select EMI option, the UPI app will show you various terms and conditions including the EMI, tenure, and the rate of interest. You can enter UPI PIN to accept the terms and conditions and complete the transaction.

OR when you enter your UPI address and get approval request on UPI app, you can choose to pay in full or in EMIs.

Who will give this loan? The bank that has issued the RuPay Credit card or the Credit line on UPI. There will be no new lender involved.

Exercise Caution

While this is a positive development and increases your payment options, we are still taking about credit, and you must be cautious with credit. Credit gives you power to spend money that you haven’t earned yet and hence must be used responsibly.

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