Weeks after the Reserve Bank of India invited suggestions from public on charging digital payments, the Union Finance Ministry has clarified that no service charge would be levied on UPI 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 latest RBI 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.
"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.
It may be mentioned here that in January 2020, the Centre withdrew the merchant discount rate (MDR) on UPI and Rupay debit card transactions, leading to exponential growth in payments through UPI.
MDR is the charge paid by a merchant to the bank, card network and point-of-sale provider for offline transactions and to the payment gateways for online purchases.
Deliberating on whether the use of payment mechanisms should incur a cost for the user, the RBI discussion paper said on 17 August that payment system operators are independent entities and have expenditure associated with the setup, signalling the likelihood of charges being brought back.
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