InvestorQ : Is it true that the RBI is planning to allow the service providers to charge for UPI transfer of funds?
Arti Chavan made post

Is it true that the RBI is planning to allow the service providers to charge for UPI transfer of funds?

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Rutuja Nigam answered.
2 months ago
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One of the big success stories in the banking and finance space in India has been rapid proliferation of the UPI facility for transfer of funds from one bank account to another. For most smaller transactions and even for regular payments, UPI has become like a default mode of transfer of funds. Till date, the UPI transfers were totally free of cost. Now the RBI has brought out a discussion paper suggesting that the RBI may offer the banks and the service providers the option to price their UPI services based on some formula.

It is interesting to first see how the popularity of UPI has risen in the last few years since it was first introduced. In the month of July 2022, India clocked total of 6.28 billion UPI transactions having a total transaction value of Rs10.63 trillion. That is a lot of volumes being pushed via UPI and also clearly indicates that the average ticket size has been very small. In fact, the average UPI ticket size is just Rs1,692. India has managed to go largely cashless only due to the success of UPI. Free transfers have been a key reason for success.

However, if the discussion paper is studied, RBI may permit charging for UPI transactions. It is just a discussion paper for eliciting comments and not yet regulation. While it will give banks the leeway to price the services, it would define a broad formula for pricing. Today, IMPS transaction are charged while NEFT is charged if executed offline. RTGS also has a limit based charge. UPI is the only mode of transfer that is free of any kind of charges. RBI wants to explore if the UPI transfers should now be put at par with other transfers.

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