In a bid to improve the payment system, the RBI seeks public feedback

By Puja Sharma

RBI in its statement mentioned it was considered necessary to undertake a comprehensive review of the rules and procedures for levying charges in different payment systems in the country, to assess their impact on the efficiency, growth, and acceptance of payment systems. It was considered useful in this context to place a discussion paper before the public and stakeholders, seeking views and perspectives on different dimensions of charges levied in payment systems. As announced in the Statement on Developmental and Regulatory Policies, the Reserve Bank of India (RBI) released a discussion paper on “Charges in Payment Systems” for public feedback.

The focus of RBI’s initiatives in the payment systems has been to ease frictions that may arise from systemic, procedural, or revenue-related issues. While there are many intermediaries in the payments transaction chain, consumer complaints are generally about high and non-transparent charges. Charges for payment services should be reasonable and competitively determined for users while also providing an optimal revenue stream for the intermediaries. To ensure this balance, it was considered useful to carry out a comprehensive review of the various charges levied in the payment systems by highlighting different dimensions and seeking stakeholder feedback.

Due to the government’s Zero-MDR policy, RuPay cards and UPI do not incur any charges for debit cards. Using this method of payment should not incur any fees for merchants. The MDR for Visa and Mastercard debit cards ranges from 0.4 to 0.9 percent depending on the acquirer and issuer.

Regarding MDR, the RBI questions whether RuPay cards should be treated differently than debit cards affiliated with international card networks. Furthermore, it asked whether the central bank should deregulate debit card interchange and let stakeholders decide what level of interchange and MDR is best for debit card transactions. The RBI has also requested feedback on whether credit card MDR charges are reasonable and whether the regulator should regulate MDR for credit card and PPI transactions.

Mr. Vishwas Patel, Chairman, Payments Council of India (PCI) and Director, Infibeam Avenues on the issuance of a discussion paper about charges in payment systems by RBI, said, “RBI has been very supportive with regulations and guidelines to deepen financial inclusion initiatives across India. The industry appreciates the issuance of a discussion paper about charges in payment systems however also believes that the pricing of financial instruments should be left up to market forces, to continue to support the required investments and innovation in digital payments. As an industry body, PCI will submit detailed feedback to RBI within the requested timeframe.”

Several aspects related to charges related to payment systems are discussed in the discussion paper, including Immediate Payment Service (IMPS), National Electronic Funds Transfer (NEFT), Real Time Gross Settlement, and UPI. Also included are prepaid payment instruments (PPIs), debit cards, and credit cards.

It was proposed by the RBI in December last year that a discussion paper on payment system charges would be floated, which would cover all aspects related to charges in various channels of digital payments. Digital transactions must be affordable to users and economically remunerative to providers.