MUMBAI: For the first time in their 30-year existence, Visa and MasterCard, the world's largest payment companies, are facing the heat in India. Lending its weight behind the local card scheme, RuPay, the government has asked state-owned banks to issue RuPay debit cards to customers.In a communique to banks last week, Gurdial Singh Sandhu, secretary at the finance ministry's department of financial services, "urged" CEOs of public sector banks to issue RuPay cards to all existing customers who do not have debit cards as well as to new clients. Banks have also been told to "encourage" merchant establishments to install point of sale terminals for RuPay cards, two banking sources told ET.While banks have not been instructed to refrain from issuing cards where transactions are processed by Visa or MasterCard, there is a clear direction to promote RuPay. Customers are typically issued a single debit card per account and banks will have to pursue the unconventional practice and possibly tweak systems to issue two debit cards to a client who insists on a Visa or MasterCard that currently have greater acceptance than RuPay.RuPay was launched by National Payments Corp of India (NPCI), set up to function as a cost-effective payment services entity. Responding to ET's query on whether PSU banks could lose rich and more brand-conscious customers to private banks (which have not received a similar direction from the finance ministry), AP Hota, MD & CEO of NPCI, said, "Such fears are unfounded. RuPay is a fully functional card payment system. We are also launching Platinum cards for HNI customers.""I'm not aware of the ministry's communication to banks. But as I understand, the government's focus is to promote financial inclusion," said Hota of NPCI.For banks, it's a mandate they will have to fulfil. Within the next six months they will have to offer the new debit card to existing customers, inform thousands of branches and submit progress report to the ministry every quarter.It's not unusual for countries and governments to support local retail payment networks that offer the software backbone and process card transactions. Countries such as Singapore and Brazil have their local payment companies while China disallows foreign payment firms to process domestic card transactions. But industry sources said an absence of a level playing field may worry global players such as Visa and MasterCard.For MNC payment firms, the stakes are high. Every year around Rs 80,000 crore worth of debit card spends happen in India, of which 5% are cross-border transactions. It's a market that's growing at close to 35% annually. Credit card transactions, growing at over 25%, are more than two times debit card spends.Asked whether RuPay would be accepted for transactions such as buying books and music on international e-commerce sites, Hota said NPCI was tying up with the US firm Discover Financial Services to promote co-branded cards to facilitate international transactions.

The fledging card scheme is trying to spread its footprint. So far,A 20 million cards have been issued. "It has full acceptance in ATMs, and of the 10.35 lakh POS (point of sale) terminals in the country, RuPay can be accepted in 9.87 lakh terminals. About 95% of debit card transactions are domestic in nature," said SK Gupta, chief project officer, RuPay. But not all merchant establishments are familiar with RuPay and few display RuPay stickers (along with Visa and MasterCard) on their counters. Till now, POS transactions worth Rs 40 crore have happened through RuPay.