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Hyderabad: Many do not mind going out without carrying any cash on person. They believe they can just scan and pay through the UPI for all purchases they make. UPI is a convenience and is free. But that might change soon and there might be a fee to pay on UPI transactions.

The RBI on Wednesday released a discussion paper on ‘Charges in payment systems’ for public feedback. It sought feedback and suggestions by October 3. It sought to know if subsidising costs was a more effective alternative to zero charges, if UPI transactions were to be charged, should the merchant discount rate (MDR) be a percentage of transaction value or a fixed amount and should the charges be administered or be market determined?

The discussion paper covers all aspects relating to charges in payment systems such as Immediate Payment Service (IMPS), National Electronic Funds Transfer (NEFT) system, Real Time Gross Settlement (RTGS) system and Unified Payments Interface (UPI) and various payment instruments such as debit cards, credit cards and prepaid payment instruments (PPIs). The feedback received will be used to guide policies and intervention strategies, RBI said.

Intermediaries and costs incurred

Earlier, RBI in its ‘Statement on Developmental and Regulatory Policies issued in December last year said entities involved in providing digital payment services incur costs, which are generally recovered from the merchant or the customer or is borne by one or more of the participants. While there are both advantages and disadvantages of customers bearing these charges, they should be reasonable and should not become a deterrent in the adoption of digital payments, it had said.

It then proposed to bring out a discussion paper covering all aspects related to charges involved in various channels of digital payments such as credit cards, debit cards, prepaid payment instruments (cards and wallets), UPI. The same has been announced now.

Huge user base

India has a large mobile phone consumer base of about 120 crore and about 75 crore of them are smartphones users and about 45 crore feature phone users. Feature phone users have limited access to innovative payment products. In the first cohort of RBI Regulatory Sandbox, some innovators had successfully demonstrated their solutions for feature phone payments. These products, coupled with other complementary solutions, will facilitate UPI-based digital payment solutions on feature phones to promote wider digitisation.

Rising UPI transaction volume and value

UPI is the single largest retail payment system in the country in terms of volume of transactions. According to National Payments Corporation of India data, 338 banks were live on UPI and the total volume of transactions was 638.8 crore. The value of the transactions was Rs 10.62 lakh crore. More than 21 crore transactions happen on a daily basis. One of the initial objectives of UPI was to replace cash for low value transactions. About 50 per cent transactions through UPI are below Rs 200. These low value transactions, however, utilise significant system capacity and resources. At times, this congestion led to transaction failures.

Meanwhile, many poured their angst on the microblogging platform. “If charges applied, people will move back to cash transactions,” said a user. “It should be on the receiver side just like mdr charge on credit card! After all, they are businessmen and let them pay to get money faster!”, said another. “Then add gst 18%,’” quipped a user showing his sarcastic side. “Very good. ATMs don’t have Rs 100 / 200 notes, banks don’t have Rs 50 notes, UPI to be charged. Imagine how badly this will affect overall economic activity volume,” said another.

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Author: Howard Caldwell