The Reserve Bank of India (RBI) on August 17 released a discussion paper seeking feedback on charges related to Unified Payments Interface and credit cards among others.
The discussion paper covers all aspects relating to charges in payment systems such as Immediate Payment Service (IMPS), National Electronic Funds Transfer (NEFT) system, Real Time Gross Settlement (RTGS) system and UPI. It also covers various payment instruments such as debit cards, credit cards and Prepaid Payment Instruments (PPIs).
"Charges for payment services should be reasonable and competitively determined for users while also providing optimal revenue stream for the intermediaries," the RBI said in a release. The feedback received would be used to guide policies and intervention strategies.
The RBI, in December, had proposed to float a discussion paper on charges in payment systems which would cover all aspects related to charges involved in various channels of digital payments. The measures are required to make digital transactions affordable to users and economically remunerative to the providers.
What does the discussion paper say?
The central bank, in the discussion paper, has asked whether debit card transactions should be charged as normal funds transfer transactions and whether MDR should be uniform across merchants. MDR is an acronym for merchant discount rate. It is the commission the bank and the card issuer share between themselves. Thus, if the MDR is 0.5 percent, this amount will be shared between the bank and the card issuer (such as VISA, Mastercard, AMEX, and such).
Currently, for debit cards, RuPay cards and UPI attract no charges as they fall under the government’s Zero-MDR policy. What is this policy? It mandates that merchants should not be levied any charges to accept payment through this mode. Visa and Mastercard debit cards however attract MDR in the range of 0.4 to 0.9 percent which is shared among the acquirer and issuer banks.
In the discussion paper, the RBI has questioned whether RuPay cards should be treated differently from other debit cards affiliated to international card networks in terms of MDR. It has also asked if the RBI should deregulate MDR for debit card transactions and let stakeholders decide on the optimum level of MDR and interchange.
Additionally, for credit cards, too, the RBI has sought feedback on whether credit card MDR charges are reasonable and whether the regulator should regulate MDR for credit cards and PPI transactions.
In the context of UPI, the RBI has questioned that if UPI transactions are charged, should they be administered by the regulator or whether they should be market determined.
The regulator has also questioned if surcharges are justified and whether merchants be allowed to levy surcharge on customers. It has also asked as to who should regulate such surcharge.
Additionally, the RBI has questioned whether the RBI should charge member banks for transactions processed through NEFT. It has also asked if the RBI should prescribe charges for NEFT transactions to be levied by banks on their customers, or whether they should be market driven.
Further, it has also sought feedback on whether the central bank should regulate charges on IMPS, and whether it should fix a ceiling on the charges that can be imposed under it.
The RBI has invited feedback and suggestions on this paper on or before October 3.