According to Union Finance Minister Nirmala Sitharaman, the Central government feels that charging for digital payments is not the right moment. She proposed giving individuals free access to digital payments to boost the Indian economy.
The finance ministry stated that it has no plans to charge for UPI (Unified Payment Interface) services. Service providers' worries about cost recovery must be addressed through alternative ways.
The announcement came only days after the Reserve Bank of India requested stakeholders' opinions on implementing a tiered charge on UPI services in a discussion paper. UPI is a digital public utility that provides enormous ease to the public while increasing economic output.
The government has no intention of charging for UPI services. "Other measures must be sought to address service providers' concerns about cost recovery," the ministry tweeted.
The MoF also stated that the government gave financial assistance to the digital payment ecosystem last year. This year, it has also announced the same to encourage further adoption of digital payments and the promotion of cost-effective and user-friendly payment platforms.
The National Payments Corporation of India created UPI, an immediate real-time payment system (NPCI). This technology makes it possible to conduct peer-to-peer, inter-bank, and person-to-merchant transactions. In addition to the rapid payment service, UPI offers an open-source application programming interface.
The Reserve Bank of India issued a debate paper titled "Discussion Paper on Charges in Payment Systems.” Although UPI transactions are mentioned in the article, they are mostly connected to other types of transactions, such as Real Time Gross Settlement (RTGS), National Electronics Funds Transfer (NEFT), and Immediate Payment Service (IPS) (IMPS).
However, the study did raise three concerns about the costs of UPI transactions, which are detailed below:
These concerns contributed to the uncertainty about whether UPI transactions would be charged or not. The discussion document further states that for the fiscal year 2021-22, the government allocated Rs. 1,500 crores for fee reimbursement for RuPay debit card and UPI transactions.
Similar financial assistance has been announced for the fiscal year 2022-23. Given that an increasing number of people are using the UPI, the government may need to boost its budget to satisfy technical requirements to preserve the ecosystem in the long term.
UPI, as a money transfer mechanism, is like IMPS. As a result, it might be claimed that UPI rates can be comparable to IMPS prices for fund transfer payments.
In July 2022, the UPI recorded 6.28 billion transactions, the most since its inception six years ago. The deals were valued at '10.63 trillion. The number and value of transactions increased by 7.2% and 4.8%, respectively, in July compared to June.
According to experts of business listing platforms in India, a system should be in place to secure revenues for banks and service providers involved in UPI-related payment processing. Digital transactions in India are at an all-time high, thanks to initiatives by the Ministry of Finance and Start-up India.
India is the world leader in digital transactions because UPI transactions are now free of charge for clients. However, banks and service providers must improve the overall infrastructure and risk mitigation activities. There must be an avenue of earning for banks and service providers.
International travel is another area where UPI has grown in importance. Indians may utilize UPI to make payments in countries such as the UAE, France, Singapore, Bhutan, and Nepal.
Furthermore, the government declared its intention to link credit cards to UPI, allowing consumers to utilize UPI to make payments using their credit cards. This will provide a significant boost to b credit cards and UPI.
This is an incredible achievement. It represents the people of India's united will to embrace new technology and make the economy more environmentally friendly. "During the COVID-19 epidemic, digital payments were beneficial," Modi stated in a tweet.
UPI executed more than 46 billion transactions totalling Rs 84.17 trillion in FY22, breaking the $1 trillion barrier. UPI hopes to achieve one billion daily transactions the next five years.
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