Page 51 - Banking Finance October 2022

FEATURES

WHY UPI SHOULD

REMAIN A FREEBIE

Historically, one of the defining characteristics of almost all for the public and productivity gains for the economy. There
central banks has been the monopoly rights over issue and is no consideration in Government to levy any charges for
management of currency notes. UPI services.”

This was to suit the economic needs of a nation. It’s a Unified Payments Interface or UPI is today a household
monopoly cast on central banks by statute in most name recording over 14.55 billion transactions valued at Rs.
jurisdictions. By making available adequate quantity of cash, 26.19 trillion (Q1 2022). Systems like UPI, IMPS and RuPay
central banks grease the economic wheels at an affordable are owned and operated by National Payments Corporation
cost. of India (NPCI), which is a non-profit entity and “an umbrella
organisation for retail payment systems.” Significantly, one
In keeping with the times and advancement in computer of the objectives of NPCI has been to take initiatives that
and communications technology, central banks have taken “will contribute towards achieving cashless society.” NPCI is
the lead in developing various payment products, outside not just a Section 8 company under Companies Act, 2013.
the traditional cash-based payment system, with a view to
It is now a group having two wholly-owned subsidiaries under
reducing cost and enhancing user convenience.
its belt. As per the balance sheet (FY 2020-21) of NPCI, the
group is prohibited by its objects to carry out any activity
Currency or cash has always come without any charge to
on commercial basis.
the users. Not so with electronic payment products for which
customers or beneficiaries in transactions have had to bear
a small amount of fees imposed by Payment System Is UPI subsidised?
Participants (PSPs), Payment System Operators (PSOs), Card
It need be mentioned that the Government had budgeted
Networks, Intermediaries, Third Party PSOs, etc.
Rs. 1,500 crore for FY 2021-22 towards reimbursement of
charges for RuPay debit card and UPI transactions. Similar
So, when the RBI recently placed in public domain a
financial support has also been announced for FY 2022-23.
‘Discussion Paper on Charges in Payment Systems’, seeking Further, the Government had also amended the Payments
public feedback, it was only stating the obvious that “in any and Settlement Systems Act (PSS Act), to make the
economic activity, including payment systems, there does merchant discount rate (MDR) for both the aforesaid
not seem to be any justification for a free service, unless products zero, effective January 1, 2020.
there is an element of public good and dedication of the
infrastructure for the welfare of the nation.” This article contends that it is the statutory obligation of the
RBI to operate any retail Funds Transfer System that de
One particular proposal, however, attracted immediate facto functions as a substitute for currency. Further, UPI, by
reaction of the Union Government and it was quick to assert definition, is not a part of the ‘Funds Transfer Payment
that “UPI is a digital public good with immense convenience System’, like NEFT, RTGS and IMPS, necessitating

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