FM On UPI: Not Right Time To Levy Charges On Digital Payments

SUMMARY

Recently, an RBI paper has asked for feedback on the levy of charges on digital payments

The FM has recently refuted all such rumours of imposing charges on UPI

She added that access to digital payments should be free so it can enhance the Indian economy

Union Finance Minister Nirmala Sitharaman has stated that the Centre believes it is not the right time to make digital payments such as UPI chargeable and that people should be able to access digital payments freely so it can enhance the Indian economy.

She suggested that digital payments are a public good and necessary to digitise the Indian economy. Thus, there is no imminent plan to make the payments chargeable.

Notably, the comment comes a few days after the finance minister, via a tweet, refuted rumours of the government potentially levying charges on UPI. The ministry clarified that there is no consideration within the government to levy any charges for UPI services.

“The concerns of the service providers for cost recovery have to be met through other means,” the FM had said in a statement.

Sitharaman added that the government already provides financial support to help with the cost of payments’ digitisation.

Last year, Sitharaman had allocated INR 1,500 Cr to promote digital payments and transactions in under-served regions of the country. The allocation will also continue this year to boost digital payments in FY23.

The current comment comes after an RBI paper asked for feedback on the levy of charges on digital payments, or whether to subsidise the costs incurred for enabling UPI transactions. The central bank also sought feedback on understanding the nature and the quantum of such charges on UPI, when it gets through.

Currently, not customers or merchants, but infrastructure providers/banks have to bear the costs of the payments. Following the RBI mandate, with the passing of such a rule, the cost can be passed on to the business in the form of MDR, or it can also go to the customer as a customer charge. Presently, the UPI does not charge any MDR.

For the uninitiated, MDR is one of how digital payment enablers can recover the costs incurred. The digital payment service provider charges a from the merchants for every digital transaction that happens at their point of sale (PoS); mostly the MDR is passed onto customers, something easily visible in IMPS, RTGS and NEFT transfers.