The Central government may consider a 0.3 % uniform digital payment (UPI) facilitation fee to fund the infrastructure required for such transactions and also to ensure the financial viability of the UPI payment system, suggested a study by IIT Bombay.
The facilitation fee of 0.3 % can generate around Rs 5,000 crore in 2023-24, said the study titled 'Charges for PPI-based UPI payments--The Deception'. The study, which analyses the impact of the National Payments Corporation of India (NPCI) decision to introduce interchange fee on payments through mobile wallets, argued that the payments received by merchants should remain 'unpolluted' whether they are from UPI directly or through prepaid e-wallets.
The National Payments Corporation of India, effective April 1, 2023 introduced an interchange fee of 1.1 % on transaction amount for using prepaid payment instruments for making payments through UPI to merchants. These will apply on prepaid wallet-based UPI merchant transactions. Rather than thrusting the operational expenses onto the merchants and creating a disparity, it should be borne by the prepaid wallet user, thereby never introducing a situation similar to passive smoking.
This will keep all UPI-based payments received by merchants unpolluted and unburdened of merchant discount rate (MDR). According to the IIT Bombay Technical Report, the absence of an upfront payment-surcharge would lead to an overall increase in the selling price for all, even those who pay through plain vanilla UPI (normal UPI).
Consequently, the business cost of merchant will go up. Against this backdrop, the study made a case for introducing 0.3 % facilitation fee on digital payments which could generate as much as Rs 5,000 crore in fiscal 2023-24.
However, as per the present law no bank or system provider who operates UPI (unified payments interface) shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment by using UPI as a mode of payment. So bank account transaction and payment on the same wallet are now free. On more than one occasion, the banks and system providers had tried to interpret the UPILaw in a way that suited them.
UPI transactions over Rs. 2000 to carry surcharge of 1.1-pc from April 1
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