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Blame game on UPI charges: Payments council chief claims banks take away most of the govt incentive – Moneycontrol

Representative image.

All of the monetary support provided by the government to make up for the zero charges levied on Unified Payments Interface (UPI) transactions has been appropriated by banks, said Payments Council of India (PCI) Chairman Vishwas Patel.

Patel, who is also the executive director of omnichannel payments provider Infibeam Avenues, was responding to the Finance Ministry’s tweet which said that there is no consideration to levy any charges on UPI transactions and that the government has provided financial support to the ecosystem instead.

Unlike other digital payment methods, no fees are levied to merchants accepting UPI and RuPay debit card transactions as per the government’s Zero merchant discount rate (MDR) policy which was formulated to encourage the adoption of these homegrown payments services.

However, with UPI now making up for over 60 percent of digital transactions and recording transactions worth Rs 10 lakh crore every month, the industry has argued that zero fees are a loss to the ecosystem and will discourage further investments in the space with no returns.

In December 2021, the government had announced a Rs 1,300 crore scheme to incentivise banks and through them payment gateways and UPI players for transactions. To be eligible for the full incentive, banks were required to show at least 10 percent year-on-year (YoY) growth in the number of RuPay Debit card and 50 percent YoY growth in UPI transactions by the end of the last quarter of the scheme.

“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,” Patel said in his tweet.

PhonePe, Google Pay and Paytm Payments Bank enjoy the highest share in UPI transactions, together capturing almost 95 percent of transactions. PhonePe alone enjoys a market share of 46 percent in monthly transactions, followed by Google Pay’s 34 percent share.

The Finance Ministry’s clarification came after many news reports suggested that the Reserve Bank of India (RBI) was considering levying charges on UPI transactions after the regulator floated a discussion paper on August 17 seeking feedback on charges on digital payment modes.

However, RBI’s discussion paper only asked if charges must be administered by the regulator or whether they should be market determined in a scenario where UPI transactions are charged.

The paper mentioned that a tiered charge could be imposed based on the value of transactions. But, the point was not set forth for further consultation or discussions.

PCI is the apex body of payments and settlement players in the country representing digital payments ecosystem players including payment gateways, offline payment providers, card networks as well as the National Payments Corporation of India (NPCI) which operates UPI.