New Delhi: India could soon witness a significant shift in its digital payment ecosystem as the Finance Ministry proposes to amend the existing laws governing the Unified Payments Interface. The potential move has sparked widespread concerns among millions of citizens regarding everyday purchases like milk and vegetables becoming expensive due to added transaction fees.
The core of the development lies in a proposed amendment to Section 10A of the Payment and Settlement Systems Act of 2007. Currently, this specific section strictly prevents banks and payment companies from levying any convenience fee or Merchant Discount Rate on UPI and RuPay digital transactions. By amending this rule, the government aims to secure the legal authority to determine which digital payment methods will remain completely free and which ones might attract a nominal charge in the future.
However, financial experts urge retail consumers not to panic. The proposed legal change does not mean that immediate charges will be imposed on everyday UPI transfers. Even if the Merchant Discount Rate is reintroduced eventually, financial rules dictate that this fee is borne by the business owners and not the direct consumers. Furthermore, person to person money transfers will remain entirely free of cost. Analysts suggest that any future charges will likely target large scale merchants or high value transactions exceeding two thousand rupees, keeping small shopkeepers and daily retail buyers exempt.
The necessity for this legislative revision stems from the immense financial strain on the banking sector and digital payment companies. The zero MDR policy was introduced in January 2020 to aggressively promote a cashless economy. While it successfully propelled digital adoption across the country, running such a massive infrastructure for free has proven unsustainable.
A Parliamentary Standing Committee on Finance recently highlighted that banks and fintech companies are incurring heavy operational losses. Although the central government allocated an incentive budget of two thousand crore rupees for the ongoing financial year to support the digital payment infrastructure, the committee noted that this amount covers only a fraction of the actual operational costs.
The proposed legal update aims to strike a practical balance. It seeks to establish a sustainable revenue model that keeps the banking ecosystem financially viable without shifting the financial burden onto the common citizen relying on digital payments for basic daily needs.