Fees on payment systems: RBI seeks views from public
BBN Bureau
MUMBAI/August 18-2022: The Reserve Bank of India (RBI) has invited public opinion with a view to rationalising fees and charges in the payment systems in the county in order to make such transactions affordable and at the same time economically viable 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 credit, cards and Prepaid Payment Instruments (PPIs) are among the other payment instruments.
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 while releasing a discussion paper on ‘Charges in Payment Systems’.
“At this stage, it is reiterated that the RBI has neither taken any view nor has any specific opinion on the issues raised in this discussion paper,” the central bank said.
The RBI has asked for feedback and suggestions before 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 based on the different amount bands,” the RBI said in the discussion paper.
Currently, no cost is incurred by users or merchants in the case of payments made through UPI.
Merchant discount rate
The RBI has asked that if UPI transactions are charged, then should the merchant discount rate (MDR) be imposed based on the transaction value or should a fixed amount be charged as MDR irrespective of the transaction value?
Further, it has sought feedback on whether the RBI should decide on the charges or the market be allowed to determine if charges are introduced at all.
MDR is the rate charged to a merchant for payment processing services on various payment instruments.
For a person-to-merchant (P2M) transaction of Rs800 on UPI, collectively, the stakeholders incur Rs2 for processing the transaction, the RBI has explained.
UPI is the most preferred digital payment platform in the country, with over 6 billion transactions amounting to Rs10 trillion processed every month. It is both a funds transfer as well as a merchant payment system.
Secondly, the RBI has argued that the transaction done using a debit card is akin to a normal funds transfer payment transaction, with deferred net settlement where the merchant receives the funds on a T+n basis, the charges on such a transaction should be levied similar to a normal funds transfer.
As cost to issuer/acquirer does not generally depend on the transaction value of a debit card transaction, the charges could be uniform for all debit card transactions, irrespective of transaction amount, the RBI has argued.
