RBI seeks public feedback on whether to levy charges on UPI payments

New Delhi: The Reserve Bank of India (RBI) has asked stakeholders for feedback over the prospect of charging a “tiered” charge on payments made through the Unified Payments Interface (UPI), based on various amount bands.

The RBI’s discussion paper on fees in payment systems, which was published on Wednesday, aims to organise its policies and simplify the framework of fees for various payment services or activities, including UPI, IMPS (Immediate Payment Service), NEFT (National Electronic Funds Transfer), RTGS (Real-Time Gross Settlement), and payment instruments like debit cards, credit cards, and prepaid payment instruments (PPIs).

“At this stage, it is reiterated that the RBI has neither taken any view nor has any specific opinion on the issues raised in this discussion paper,” the central bank said.

The RBI has asked for feedback and suggestions before October 3.

“UPI as a funds transfer system is like IMPS. Therefore, it could be argued that the charges in UPI need to be similar to charges in IMPS for fund transfer transactions. A tiered charge could be imposed based on the different amount bands,” the RBI said in the discussion paper.

Currently, neither users nor retailers pay any fees while using UPI to make payments.

If UPI transactions are charged, should the merchant discount rate (MDR) be applied based on the transaction value or should a fixed sum be applied as MDR regardless of the transaction value? This is the question raised by the RBI. Additionally, it has asked for views on whether the RBI should decide on the fees or if the market should have the authority to decide if fees are introduced at all.

The MDR is the cost for a merchant to process payments using different payment methods.

According to the RBI, the stakeholders pay a total of Rs 2 for the processing of a person-to-merchant (P2M) transaction on UPI that costs Rs 800.

UPI is the most used digital payment method in the nation, processing more than 6 billion monthly transactions totalling Rs 10 trillion. Both a funds transfer and a merchant payment mechanism are included. The Union government established a zero-fee framework for UPI transactions back in 2020, effective as of January 1, 2020.

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