Paying through UPI may not be easy on the user’s pocket anymore. The central bank is considering imposing a fee for each transaction of money made via UPI.
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Unified Payments Interface(UPI) has gained popularity in India. UPI, which was introduced as an alternative to card payments and as another choice for digital payments, is now accessible outside of India. It quickly became successful because of the quick payment procedure settlement, and one of the factors contributing to its success is that there is no price for the user to utilize this. However, this rule might alter soon. The Reserve Bank of India (RBI) is thinking about adding fees to UPI payments. If you utilize UPI for all transactions, you should be aware of the RBI’s new strategy.
UPI should charge the same as IMPS for fund transfer
The RBI’s latest proposal, titled “Discussion Paper on Charges in Payment System,” implies that the bank is thinking about adding fees to each financial transaction made through the UPI system. Its goal is to assess the possibility of recovering the cost of building and running the UPI infrastructure. According to the RBI, fund transfers made through UPI are equivalent to those made through IMPS (Instant Payment Service), so theoretically, UPI should charge the same fee as IMPS.
What the RBI has recommended in its proposal
The RBI proposed that UPI payments might be subject to a tiered charge based on various amount brackets. UPI is a fund transfer system that enables real-time money movement, according to the central bank. In contrast to the T+N cycle for cards, it enables fund settlement in real-time as a merchant payment system. The deferred net foundation of this agreement between the participating banks requires a PSO.
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There doesn’t seem to be any justification for free service: RBI
In other words, banks must set up sufficient tools to help PSOs manage settlement risk. As a result, it consumes a lot of resources and investment banks, increasing costs. RBI seeks to get paid back from the clients. “There does not appear to be any justification for free service, in any economic activity, including the payment system, unless there is an element of the dedication of infrastructure to the public good and the welfare of the nation,” the RBI said.
Additionally, RBI intends to impose a fee on debit card transactions. But RBI subtly hints that everyone should shoulder the cost by asking who will bear those expenses in the article. The RBI stated in its report that “who should bear the cost of setting up and operating such infrastructure is an important issue.” The RBI seeks to impose a fixed price on debit card transactions, which are now free because the paper discusses repaying the costs incurred in establishing the complete payment system.
Ministry of Finance response to RBI Proposal
Ministry of Finance has tweeted that Govt. of India doesn’t have any consideration to levy charges on the UPI payment. They also stated that India Government has provided financial support to enhance digital payment and will continue the same this year too. The full tweet is quoted below.
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