No Service Charge on UPI, Clarifies Union Govt
IANS 22 August 2022
The Union finance ministry has clarified that no service charge would be levied on UPI (unified payments interface) transactions.
"UPI is a digital public good with immense convenience for the public & productivity gains for the economy. There is no consideration in Govt to levy any charges for UPI services. The concerns of the service providers for cost recovery have to be met through other means," the finance ministry said in a tweet.
"The Govt had provided financial support for #DigitalPayment ecosystem last year and has announced the same this year as well to encourage further adoption of #DigitalPayments and promotion of payment platforms that are economical and user-friendly, " it added.
The clarification from the government comes after media reports claimed that a latest RBI (Reserve Bank of India) paper titled "Discussion Paper on Charges in Payment System" had literature implying that the central bank was considering adding fees to each financial transaction made through the UPI system. The reports had sparked buzz on social media with several people also seeking clarification from government of India (GoI) which handles on the report.
The discussion paper by the RBI covers all aspects relating to charges on not just UPI but other payment systems like IMPS, NEFT, RTGS, debit, credit cards and PPIs.
"Charges for payment services should be reasonable and competitively determined for users while also providing optimal revenue stream for the intermediaries. To ensure this balance, it was considered useful to carry out a comprehensive review of the various charges levied in the payment systems by highlighting different dimensions and seeking stakeholder feedback," it said.
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1 year ago
This discussion paper by the country's central bank has created a needless unease among the massive number of user-stakeholders of UPI.
The timing of the discussion itself also seems premature.
The discussion paper, at this stage hence can be said to be 'needless' per se.

It is matter of normal commonsense that THE MOST IMPORTANT FACTOR behind the explosion in UPI transactions is because of ZERO MIDDLEMAN FEE which is technically called MDR.
It may also be noted the NEFT has also been made free (i.e. zero cost) through online channels i.e. netbanking, mobile banking etc..

UPI is not restricted anymore to an elite and bourgeois population of India. It has started to trickle into the remaining 'bottom of pyramid' mass citizens of India. No examples required to prove this point. The FM of India tweeted a video about UPI payments some time back.
Now, (though technically nobody ever said that UPI will be free for everrrr) any kind of discussion on charges on UPI at this stage will be nothing other than thuggery on its user-stakeholders. Also to note that NEFT continues to be free.

All this premature, ill timed and urgency shown in this, smacks of lobbies of these top three multinationals (Walmart, Google and Alibaba-PayTM) who have spent massively by way of cashbacks/doles to acquire users. One would rather say purchased users.
Now, it is time to rake in the moolah!
And what better an establishment where one stroke of policy change can alter the revenues overnight almost.
And hence in such a scenario, the interested parties will indeed lobby.

It were similar lobbies that opposed card tokenisation, reduced MDR on Rupay debit cards, stricter guidelines on recurring merchant payments and farther ago, the 2FA i.e. OTP requirement on online card transactions.
It is clear for one and all to see what the above have done to India i.e. SAFE online transactions environment. This was the start of the virtuous cycle by halting the perennial vicious cycle i.e. the masses do not adopt and hence do not transact online as the experience as well as perception is that it is unsafe. Because of the above stringent measures (mainly 2FA), the masses start to adopt virtual/online financial txns and the virtuous cycle has started.
If you look at the demography of India, it would be almost a unanimous view/call that it is a massive feat that an online money transaction mode like UPI has grown up so fast, so deep.
Such retrograde steps would be a historical mistake at this stage.

UPI is one of the success outputs of the JAM trinity/trident.

Just like the JanDhan programme that was implemented notwithstanding and without the active participation of the 'profit-only' club of intermediaries i.e. those banks that only look at per unit money made, when they have a choice to either offer or not offer such services. The GoI drove the JanDhan programme through PSU Banks and their ilk.
Similarly it would be better and acceptable to for India to have only the BHIM app and other PSU bank UPI apps (which it is assumed that may not be in that kind of hurry to make money from UPI) and not have the remaining ones led by the big three (Walmart-PhonePe, Alphabet-Google-GPay and Alibaba-Softbank-PayTM) that would rather kill the golden goose for the Indian economy, to make immediate money.
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