Mumbai: Most payment gateway service providers are continuing to charge merchants a fee for enabling and using the Unified Payments Interface (UPI) and RuPay cards despite a government notification making it illegal to do so.
According to banking sources, the Central Board of Direct Taxes has directed query to payment service providers on their position with regard to charges for UPI and RuPay card transactions. This comes as a follow-up to the board’s order in August 2020 asking banks to refund any fees collected for payments using RuPay or UPI.
In December 2019, the government had issued a notification designating RuPay debit cards and the UPI as prescribed electronic modes of payments, against which banks and service providers cannot impose any charges.
Bankers have largely been critical of the ban on charges as there is no move to compensate those who provide the payment infrastructure. The RBI has only last week announced the setting up of a payments infrastructure development fund.
However, this will be used to compensate those who rope in retail shopkeepers and other essential services in small towns and the northeast. According to payment gateway service providers, it is possible to offer free services to small merchants. But, they add, there is a big cost involved in processing payments made to large online merchants.
The government notification makes it clear that no charge of any kind can be imposed for facilitating UPI and RuPay debit card transactions.While most banks had said that zero fees would slow down merchant acquisition, Paytm had used this as an opportunity to incentivise merchants to on-board them on its network. A spokesperson confirmed that Paytm still does not charge merchants for facilitating UPI and RuPay debit card payments online.
With the Budget around the corner, there is fresh lobbying by banks to lift the ban on charges. The National Payments Corporation of India (NPCI) too is in support of the ban being lifted. Last June, at a fintech event, NPCI MD & CEO Dilip Asbe had said that the merchant discount rate (merchant fees) are needed because it funds the acceptance, servicing and acquiring of infrastructure for UPI in the country.