In a move that could impact the growth of digital payments, the National Payments Corporation of India (NPCI) has reportedly approved part of the banks request to remove interchange fees on Unified Payments Interface (UPI) and RuPay card transactions.
NPCI, in its steering committee on Monday, decided to make interchange fees zero. In contrast, it is still reviewing payments service provider (PSP) fee and switching fees, said a TOI report quoting people aware of the development.
NPCI has reserved its decision on removing the PSP fee and switching fee as it is concerned that the decision will hamper its revenues and PSPs like PhonePe and Google-Pay.
It is also concerned that it might hit the growth of UPI, which has witnessed a phenomenal growth in the past two years.
Entrackr queries seeking details of the plan to NPCI CEO Dilip Asbe did not elicit a response.
Last week, the Indian Banks’ Association (IBA) had written a letter to the National Payments Corporation of India requesting a complete waiver of interchange, PSPs and switching fees.
Entrackr, in its report, had quoted the letter dated January 22 signed by B Raj Kumar, Deputy CEO, IBA. It had requested NPCI’s MD and CEO Dilip Asbe to abolish the fees mentioned above.
If NPCI grants a complete waiver, the payment corporation along with banks, networks and third-party apps – PhonePe, Paytm and Google Pay – will not earn anything from UPI and RuPay debit card transactions.
Currently, NPCI charges the switching fee from banks on RuPay card transactions.
At present, IBA has 252 banks as its members comprising of public, private, foreign and cooperative regional banks.
Earlier this month, Finance Minister Nirmala Sitharaman had said that zero merchant discount rate (MDR) policy would stay and the government would not compensate payment firms on losses from waiving off the transaction charges.
In July last year, the FM had first proposed the abolition of MDR, which was followed by a notification from the department of revenue in December.
However, the banks and payment firms, including the Payment Council of India had said that zero MDR would lead to the whole digital payment industry left without a business or revenue model.
The annual revenue loss due to zero MDR is pegged at around Rs 1,800 crore.