The Reserve Bank of India (RBI) has sought the feedback of the public on the possibility of imposing a phased charge on payments made through Unified Payment Interface (UPI) in a bid to make such transactions affordable as well as economically remunerative for the entities involved.
The payment systems include Immediate Payment Service (IMPS), National Electronic Funds Transfer (NEFT) system, Real Time Gross Settlement (RTGS) system and Unified Payments Interface (UPI). Debit cards, credit cards and Prepaid Payment Instruments (PPIs) are among the other payment instruments.
The central bank which released its discussion papers on Charges in Payment Systems said it aims to streamline its framework of charges for the above said payment services.
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The focus of RBI’s initiatives in the payment systems has been to ease frictions which may arise from systemic, procedural or revenue-related issues, the central bank said.
The RBI has sought public views on 40 specific questions with regard to charges and levies in payment systems by October 3.
“UPI as a funds transfer system is like IMPS. Therefore, it could be argued that the charges in UPI need to be similar to charges in IMPS for fund transfer transactions. A tiered charge could be imposed on the different amount bands,” the discussion paper said.
While there are many intermediaries in the payments transaction chain, consumer complaints are generally about high and non-transparent charges.
RBI stressed that charges for payment services should be reasonable and competitively determined for the users, and also provide 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.
In its discussion paper, the RBI has sought to know if UPI transactions are charged, should the Merchant Discount Rate (MDR) be imposed based on the transaction value or if a fixed amount be charged as MDR.
The central bank has also asked stakeholders to let it know if RBI should decide on the chargers or allow the same to be determined by the market, if and when the changes are introduced.
Charges in a payment system are the costs imposed by the Payment Service Providers (PSPs) on the users (originators or beneficiaries), for facilitating a digital transaction. The charges are recovered from the originators or the beneficiaries depending on the type of payment system.
In a funds transfer payment system, the charges are generally recovered from the originator of the payment instruction. These are usually levied as an add-on to the amount earmarked for remittance. In the case of a merchant payment system, the charges are generally recovered from the final recipient of money (merchant). This is generally done by deducting the same from the amount receivable by the merchant or a discount to the amount receivable by the merchant.
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Entities involved in providing digital payment services incur costs, which are generally recovered from the merchant or the customer or is borne by one or more of the participants. While there are both advantages and disadvantages of customers bearing these charges, they should be reasonable and should not become a deterrent in the adoption of digital payments, the RBI had said earlier.
Users or merchants currently do not incur any cost for payments made through UPI.
(With inputs from agencies)