Unified Payments Interface (UPI), the numero uno method of payments both in online and offline transactions in India took it to the internet once again regarding the fees the government could levy on the transactions. The source of speculation was a discussion paper released by the Reserve Bank of India (RBI), however, it has been clarified by the Ministry of Finance that there won’t be any fees on any UPI transactions simply because UPI is a digital public good.
The good news is, that there won’t be any fees on UPI payments
According to the latest confirmation from the Ministry of Finance, there won’t be any fees levied on UPI payments in India. It is because UPI is a digital public good rolled out for the convenience of the public and the productivity gains of the economy. The government declared a mandate with effect from January 1, 2020, that UPI will have a zero-charge framework which has helped it grow immensely in India.
UPI is a digital public good with immense convenience for the public & productivity gains for the economy. There is no consideration in Govt to levy any charges for UPI services. The concerns of the service providers for cost recovery have to be met through other means. (1/2)
— Ministry of Finance (@FinMinIndia) August 21, 2022
With that being said, the government has clarified that it doesn’t have any incentives in charging fees for UPI payments. It has asked the service providers to consider other sources for cost recovery. The statement also points out that the Government of India provided financial support for services providers towards the #DigitalPayment ecosystem last year and will be repeated this year as well as it has been already announced. It is to encourage further adoption of Digital Payments in India and make it both user-friendly and economical in the process.
UPI payments in India allow transactions between both users and merchants without charging any fees. The discussion paper released by RBI titled “Discussion Paper on Charges in Payment Systems” talks about UPI as a similar method to IMPS where a fee is charged for transacting using the latter method.
The paper further asks for feedback from the general public on where zero charges are the most effective solutions. Also, it talks about the MDR of a percentage of the transaction value to be levied on each UPI transaction or it should be a fixed amount. Also, if there are charges to be introduced, should they be administered by the RBI (or other authorized parties), or should be market determined?
Thus, it is clarified that there won’t be any charges levied on UPI payments in India as of now.
