New tension of common man: Money may have to be paid for every UPI payment: RBI brought proposal

Be careful if you use UPI for every payment. RBI has come up with a new proposal, according to which the central bank is considering charging fee for every paisa transaction using the UPI system.

New tension of common man: Money may have to be paid for every UPI payment: RBI brought proposal

UPI (Unified Payments Interface), has been a hit in India. Launched as an alternative to card payments and another option for digital payments, UPI is now available outside India as well. Due to the quick settlement of the payment process, it got instant success and one of the reasons for its success is that the user does not need to pay any charges for the same.

But soon this rule may change. In fact, the Reserve Bank of India (RBI) is now considering levying charges on UPI payments. If you also use UPI for every payment, know what is RBI’s new plan…

UPI should charge same as IMPS for fund transfer

Titled “Discussion Paper on Fees in Payment Systems”, RBI’s new proposal suggests that the central bank is looking at levying charges for every paise transaction using the UPI system. The objective is to examine the feasibility of recovery of investment cost and performance of UPI infrastructure.

RBI noted that fund transfer using UPI is similar to IMPS (Instant Payment Service), so arguably, UPI should charge the same as IMPS for fund transfer.

Know what RBI has suggested in its proposal

The RBI suggested that tiered charges may be levied on UPI payments based on different amount brackets. According to the central bank, UPI is a fund transfer system that enables real-time movement of funds.

As a merchant payment system, it facilitates real-time fund settlement, unlike the T+N cycle for cards. This agreement between the participating banks is done on a deferred net basis requiring PSOs.

Didn’t see any justification for free service: RBI

In other words, banks need to put in place an adequate system to facilitate PSOs to address settlement risk. Therefore, it consumes a lot of investment and resources of banks, leading to additional costs.

RBI wants to recover it from the customers. “In any economic activity, including payment systems, there is no justification for free service, unless there is an element of dedication of infrastructure to the public good and the welfare of the nation,” RBI said.

RBI also wants to levy charges on debit card transactions

But the RBI paper wants to know who will bear the cost, which indirectly indicates that the cost should be borne by all. “But who will bear the cost of setting up and operating such infrastructure is an important issue,” RBI said in its paper.

The paper talks about recovery of cost on setting up the entire payment system, hence RBI wants to levy a fixed charge on debit card transactions as well, which is currently free.

Also read: RBI may give a gradual blow, UPI fund transfer will also be charged