Last Updated on 14/12/2021 by Ulka
Governor Shaktikanta Das announced during the December 8 monetary policy announcement that the Reserve Bank of India (RBI) will release a discussion paper on levies on digital payments in India.
RBI will also introduce UPI-based payment products for feature phones in order to increase financial inclusion. In India, UPI is the most widely used digital payment system. In November 2021, UPI processed around 4.1 billion transactions totalling Rs. 6.68 lakh crore.
The RBI will also increase the transaction limit for UPI payments for the RBI’s Retail Direct scheme, which is now set at $5 lakh. The previous ceiling was set at Rs. 2 lakh. It will, according to Das, assist to expand the UPI payment segment and making transactions even easier.
The officials also stated that the RBI will issue a discussion paper on various charges in the payment system, including cards, wallets, and UPI.
The application of a merchant discount rate (MDR) on these transactions, which will allow the facilitators to profit, is one of the long-standing requests of the UPI players in India.
Currently, no one gets money on UPI-based payments, including Paytm, Google Pay, and PhonePe, because they are not authorised to charge any commission. The same players, however, can charge for non-UPI digital transactions.
In a press conference on September 8, PhonePe’s Founder and Chief Executive Sameer Nigam stated that 85-90 per cent of the company’s transactions are presently carried out using UPI, which has “zero MDR.” PhonePe is the largest participant in this arena, processing around 45 per cent of UPI transactions in India on a monthly basis. However, it is unclear whether the RBI would pay attention to this issue.
“At Mswipe, we noticed this trend as well, with our merchants experiencing a rise in UPI transactions,” said Ankit Bhatnagar, Head of Product at Mswipe. In September 2021, Mswipe merchants processed transactions of INR 810 crore, up significantly from INR 132 crore in October 2020. The RBI’s proposal to introduce UPI-based payment products for feature phones will increase digital payment acceptability and financial inclusion. This would benefit users not only in terms of flexibility and convenience but also in terms of bringing more small merchants into the digital economy and boosting the country’s payment infrastructure.”