Incentives on UPI 'appropriated by banks', says Payments Council chairman

Update: 2022-08-22 10:07 GMT
Paytm and BHIM UPI board displayed for online buying purpose at grocery shop | iStock Photo

A day after the government said it would not levy any charges on UPI transactions, Payments Council of India (PCI) Chairman Vishwas Patel has said that all the monetary support provided by the government for such transactions was appropriated by banks.

Dismissing talk of charges being levied on UPI transactions, the Finance ministry had on Sunday said that the government has provided financial support to the ecosystem instead.

In response, Patel said: “All the support money provided by the finance ministry has been appropriated by the banks only (no single bank has even a significant single digit volume in UPI)… none of the payment aggregators or facility providers received anything.”

The government had in December 2021 announced a Rs 1,300 crore scheme to incentivise banks to push up digital transactions through Rupay cards and UPI method. Banks needed to show at least 10 percent year-on-year (YoY) growth in RuPay card usage and 50 percent YoY growth in UPI transactions to be eligible for the incentive. This incentive would enable them to give the digital service for free to customers.

However, it was not banks but PhonePe, Google Pay and Paytm Payments Bank that had a lion’s share of the UPI market at 95%. PhonePe alone is reported to have 46 percent share in monthly UPI transactions, followed by Google Pay’s 34 percent share.

Non-banking entities are complaining that charging zero fees on UPI transactions were resulting in a loss to the ecosystem and would discourage further investments.

The RBI had last week in a discussion paper sought to know whether charges should be levied on digital payment modes. This had set off talk that there could be such charges soon. But the finance ministry denied the same in a tweet on Sunday.

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