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No move to levy charges on UPI services: Finance ministry

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NEW DELHI: There is no move in the government to levy any charges on UPI (Unified Payments Interface) transactions, the finance ministry said on Sunday. It asserted concerns of service providers for cost recovery have to be met through other means.
“UPI is a digital public good with immense convenience for the public and productivity gains for the economy. There is no consideration in the government to levy any charges for UPI services,” the finance ministry said on Twitter in a series of posts.
It said the government had provided financial support for the digital payment ecosystem last year and has announced the same this year as well to encourage further adoption of digital payments and promotion of payment platforms that are economical and user-friendly.
Apprehensions about levy of charges on UPI transactions had been triggered by a discussion paper on fees in payment systems. The RBI‘s paper on payments has not made any suggestions. However, it has flagged issues by raising questions on several topics, such as whether these charges should be regulated or not, whether merchant fees on credit cards should be linked to value and whether free transactions should be replaced with subsidy to providers. Sources said it is a discussion paper only and no decision has been taken and only suggestions have been sought.
According to industry players, zero fee is responsible for the explosive growth in UPI. But, much of the growth has been pushed by fintechs backed by PEs and may not be sustainable unless there is some revenue. “The RBI already regulates MDR on debit cards, while the government has mandated zero MDR on UPI (peer to merchant transaction is incentivised by the government) despite the underlying ecosystem cost of 0.25%,” said Anand Dama, senior research analyst with Emkay Global in a report.
The UPI is described as a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing and merchant payments under a single system. UPI transactions have soared and helped in massive financial inclusion efforts.

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