India has experienced a rapid expansion of the Unified Payment Interface, or UPI. When buying groceries, gadgets, and other items online or off. Customers are increasingly adopting UPI as their primary method of payment. One of the numerous factors contributing to UPI’s popularity in India is the fact that it is totally free. Moreover, it provides a simple, no-frills user experience. However, it appears that a new UPI transaction charge may be shortly introduced by the Reserve Bank of India.
The top financial system regulator in India has requested input from interested parties on the notion of charging for UPI transactions. Despite without taking a definite stance, the RBI’s most recent discussion paper (via) hints that the country’s top bank is thinking about charging a fee for UPI transactions in India.
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RBI May Charge UPI Transaction Fee
In its discussion paper, the RBI stated that as of January 1, 2020, the government had established a zero-charge system for UPI transactions. As a result, neither consumers nor merchants will incur any fees when using UPI. However, in order to comprehend the viewpoint of stakeholders, it has requested for “elicit general feedback.”
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“UPI supports the settlement of payment transactions by combining a variety of participants and is both a money transfer and a merchant payment system. The money transmission mechanism UPI is similar to IMPS. Therefore, it may claim that the fees in UPI for fund transfer transactions must be comparable to the fees in IMPS. According to the various amount bands, a tiered charge may be applied, the central bank stated. The RBI did not provide any guidance about fees for UPI transactions, despite saying as much.
The RBI questioned whether, if UPI transactions are charged, the MDR should be assessed as a fixed sum or as a percentage of the transaction value. Or, if fees are implemented, should they be managed (say, by the RBI) or left to market forces?
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By October 3, the Indian central bank wants to hear from interested parties. For the time being, UPI payments in India are free for both consumers and businesses to use.
Anushka Saxena
A hardworking, dedicated and fun-loving person who always loves to explore new things, meet new people and try to make every journey worth remembering. Cheers!