The government has notified rules specifying that banks and payment system providers cannot impose charges on UPI transactions of up to Rs 2,000
The government has notified rules specifying that banks and payment system providers cannot impose charges on UPI transactions of up to Rs 2,000, bringing clarity to the recent debate over whether users could have to pay fees for digital payments.
The Ministry of Finance issued a gazette notification on Monday under the Payment and Settlement Systems Act, 2007. It listed UPI transactions of up to Rs 2,000 and debit card payments made through RuPay as electronic payment modes for which customers cannot be charged.
The notification comes after concerns were raised over possible charges on UPI payments following the passage of Taxation and Other Laws (Amendment) Act in Parliament that proposed changes to the legal framework governing payment systems.
However, the notification states that transactions up to Rs 2,000 will remain charge free, leaving scope of levying charges on transactions above this threshold limit.
What the new notification says
The government has specified two categories of electronic payments under the Payment and Settlement Systems Act, RuPay-powered debit card transactions and UPI payments up to Rs 2,000.
For these transactions, banks and payment system providers cannot recover charges from customers, either directly or through indirect means.
The government had previously sought to address these concerns. In August, the Finance Ministry had said consumers would not have to pay transaction charges for making UPI payments. It had also maintained that person-to-person UPI transactions would remain free.
More from BusinessWhat about MDR on UPI?
The government had, however, indicated that a Merchant Discount Rate (MDR) could be introduced in the future for certain merchant transactions.
According to the Finance Ministry, if MDR is introduced, it would apply only above a specified threshold and to a limited category of merchant transactions. The ministry had said the rate would be significantly lower than the MDR charged on debit and credit card transactions.
MDR is the fee paid by a merchant to banks and other payment service providers for processing a digital transaction and covering costs linked to payment infrastructure, processing and settlement.
Credit card transactions generally carry MDRs of around 1-3 per cent, while debit card transactions can attract charges of up to 0.9 per cent.
The latest government notification, however, specifically protects UPI transactions up to Rs 2,000 from bank charges.
