The Finance Ministry on Sunday clarified that it is not thinking of levying charges for Unified Payment Interface (UPI) transactions. The statement comes two days after the RBI raised the issue of imposition of duty through a discussion paper.
“UPI is a digital public good with immense convenience for the public and productivity gains for the economy. There is no idea in the government to levy any charges for UPI services. The concerns of the service providers for cost recovery will have to be met through other means,” the ministry said in a tweet. On August 17, RBI had said in a discussion paper that as a fund transfer system, UPI is similar to IMPS. Hence, “It can be argued that the charges in UPI should be similar to the charges in IMPS for fund transfer transactions. A tier of charges may be levied depending on the band of different amount.”
The central bank insisted that it has not issued instructions regarding charges for UPI transactions. The government has made a zero-fee framework mandatory for UPI transactions with effect from January 1, 2020. This means that the charges in UPI are zero for users and merchants alike. The bank also said that in order to get a general response, certain questions have been included in the discussion paper as to which approach should be adopted.
It said that PSPs (payment service providers) in any payment system should generate income for continuous operation to facilitate investment in new technologies, systems and processes. This applies regardless of the system being operated by a public or private sector entity. The paper also states that the estimated cost involved in processing a UPI P2M transaction with an average value of ₹800 is ₹2, which does not include any incentives to promote digital payments.
The paper states that UPI as a fund transfer system enables real-time movement of funds. Also, as a merchant payment system, it offers real-time settlement facility as compared to T+N settlement cycle for card settlement. However, settlement among the participating banks in UPI is on a deferred net basis. To facilitate this settlement, PSOs and banks need to put in place adequate systems and procedures to address settlement risk. This includes the additional cost of the system, it added.
The paper acknowledged that paying merchants using UPI does not require the installation of expensive infrastructure as UPI QR codes are used. The cost of merchant infrastructure for UPI is lower as compared to card-based acceptance infrastructure. Keeping all these in mind, the paper asked three questions for feedback. First, in the context of zero duty, is subsidy cost a more effective option? Second, f UPI transactions are charged, should the MDR be a percentage of the transaction value, or should a fixed amount be charged irrespective of the transaction value? And third, if charges are introduced, should they be administered (eg, by the RBI) or market determined?
All these gave the impression that the RBI was in favor of levying charges on UPI transactions, following which the ministry came out with a clarification. In another tweet, the ministry said, “The government provided financial support for the digital payments ecosystem last year and this year also announced to encourage the adoption of #DigitalPayments and promote payment platforms that are affordable and user-friendly. suited.”
21 August 2022