UPI or the Unified Payment Interface is one of the most popular ways of making modern payments these days. It is hardly anyone who does not understand the UPI payments or system these days.
UPI was launched in 2016, as an instant money transfer program created by the National Payments Corporation of India (NPCI). UPI helped facilitate online payments across different sectors in the Indian ecosystem. UPI has lowered the barriers and has empowered the citizens. UPI payments are easy, the apps are user friendly, secure, scalable, and democratic.
According to a 2021 report by NPCI “39 billion UPI transactions were carried out in India during 2021. The total worth of money transferred using the payment system was around $940 billion, which is around 31% of India’s GDP.”
Now the entire fuss is about if NPCI will levy any charges on the transactions made through the UPI.
The Importance of UPI in India
UPI plays an important role in interbank transactions which can be completed in minutes. One can access different bank accounts through a single app.
UPI supports utility bill payments, QR codes (scan and pay), as well as over the counter payments. It can be used to order goods online ranging from electricity bills, grocery, medicines and anything that you can buy over the internet is basically powered by UPI. Another popular sector where UPI recently gained a lot of popularity is the betting industry or online gaming.
Cashless transactions are a demand of time and generations. UPI payments have become increasingly popular with almost all betting apps legal in India. Everyone demands safety and security and to top it all the convenience UPI apps offer is exceptional.
Will UPI levy any transaction charges?
A few days ago, the RBI sought public feedback about levying transaction charges on the UPI payments.
The RBI had asked stakeholders if the merchant discount rate (MDR), a fee paid by merchants to acquiring banks, should be brought back for UPI transactions.
The RBI seeks the feedback on if the digital payment services should be levied with a fee. There was a set of 40 questions, which can be answered till October 3. The RBI stated that the feedback will be used to form policies and intervention strategies.
The discussion paper from RBI covered 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), etc.
RBI Questions for Feedback
The discussion paper has shared some of the following questions for public feedback:
- “In the context of zero charges, is subsidizing costs a more effective alternative?
- If UPI transactions are charged, should MDR for them be a percentage of transaction value or should a fixed amount irrespective of the transaction value be levied?
- If charges are introduced, should they be administered by the RBI or be market determined?”
The Current Decision by the Indian Government
However, there is a clarification that came from the Ministry of Finance over the past few days on the feedback that the Indian government is not going to charge any transaction fee on the UPI payments.
The Ministry of Finance confirmed the concerns of the UPI service providers for cost recovery and stated that these have to be met through other means. It was also clarified that UPI is a digital public good with immense convenience for the public and productivity gains for the economy and there is no consideration to levy any charges for UPI services yet.
Just like last year this year too the Govt has provided financial support for the Digital Payment ecosystem. This step really encourages the promotion of payment platforms that are both secur, convenient and easy to use.
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