InvestorQ : Has the government clarified that it will not be charging for UPI transactions?
vidhya Laxmi made post

Has the government clarified that it will not be charging for UPI transactions?

sarah Leo answered.
2 months ago

Yes, that is absolutely correct. The Ministry of Finance has clarified that UPI transactions will not be charged. This came in response after RBI had put out a draft paper for public comments on how UPI transactions should be charged. RBI was of the view that UPI had a cost and the operators should be allowed to recover some of the cost. The UPI or Unified Payment interface is just about 6 years old and is a government sponsored facility to transfer funds free of cost across accounts with an (@) separated ID like “ABCD@hdfcbank”.

In a quick clarification, the Ministry of Finance has publicly clarified that the government was not considering levying any charges on UPI services. The government view is that if there is a cost to be recovered, it must done by other means like monetizing the platform rather than charging the customers. UPI has been a phenomenal success in India purely due to its zero cost model and simplicity. According to MOF, the UPI was not comparable to NEFT, IMPS and RTGS, which were formal transfers. UPI was about financial inclusion.

Why has the government taken this kind of a stand. They have a justification. Firstly, UPI has been responsible for boosting financial inclusion in India and making online transfers possible across India, instead of paying cash. Secondly, the combination of Jan Dhan and UPI facility, meant people transfer small amounts at zero cost and with zero latency. For instance, the month of July 2022 alone, there were 6.28 billion UPI transactions moving about Rs10.634 trillion. Average ticket size is typically retail level at Rs1,693 per transaction.

Back in February 2020, the government had specifically mandated UPI transactions as a zero-charge framework. That means; charges in UPI are nil for users and merchants alike. That is why, the Ministry of Finance has publicly and specifically clarified that no charges would be levied on UPI transactions. The debate is over and for now the UPI transactions will be free. Government is fully justified in putting its foot down. UPI is too important for financial inclusion to be killed by charging. It is almost becoming a habit with the banks.