Mumbai, August 5: The Governor of the Reserve Bank of India (RBI), Sanjay Malhotra, stated on Wednesday that the costs associated with operating digital payment systems like the Unified Payments Interface (UPI) will need to be borne by someone. However, he clarified that this burden does not necessarily have to fall on the average consumer.
During a press conference in Mumbai, he was asked about the potential implementation of Merchant Discount Rate (MDR) or commission on UPI transactions. In response, he noted that it is too early to make any definitive statements on the matter.
Sanjay Malhotra remarked, “It is premature to comment on this. We should wait for future developments. Ultimately, someone has to bear the costs, but it does not have to be the common consumers.”
Previously, the RBI Governor mentioned that maintaining and developing the infrastructure for digital payments requires funding in some form. However, there is currently no formal proposal or framework to charge fees to average consumers.
Meanwhile, the Finance Ministry has proposed amendments to the Payment and Settlement Systems Act, aimed at providing legal flexibility for potentially charging merchants for UPI transactions exceeding ₹2,000 in the future. Senior officials have indicated that regular UPI payments made by consumers will remain free of charge.
Government officials assert that over 90% of transactions related to daily purchases such as milk, vegetables, and groceries will not fall under any potential MDR fees. This means that the likelihood of additional charges for everyday payments is very low.
Currently, MDR is applicable to transactions made via credit and debit cards. However, most merchants do not pass this additional cost onto customers and instead absorb it themselves.
The Finance Ministry has proposed changes to Section 10A of the Payment and Settlement Systems Act, which would remove strict provisions related to zero charges, granting the government greater freedom to issue notifications regarding fees for various digital payment methods in the future.
According to the bill presented in the Lok Sabha, the government will have the authority to determine which digital payment methods will remain fee-free and which may be subject to MDR in the future.
Under current law, banks and payment service providers are not allowed to impose any fees on notified payment methods like UPI and RuPay debit cards. The proposed amendments could pave the way for changes in this arrangement.
However, both the government and the RBI have indicated that any potential changes aim to ensure the sustainability of the digital payment system without imposing additional burdens on average consumers. The final decision regarding MDR on UPI will be made based on future circumstances and policy needs.
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