Banks may have abolished UPI-based transaction costs, but many have questioned the necessity for over 20 transactions a month and noted that ATM transactions beyond a specific limit are also charged. The government ordered banks to drop UPI transaction fees. “But a deeper look at the data suggests that many transactions are really tiny ticket in nature, and many of them may be done purely for the purpose of earning a cashback or incentive,” said a bank executive who did not want to be identified.
UPI charges are not for income generating, he said. “Banks were not generating profit from these levies, which amount to less than 1 crore a month for most, but they are utilised for sustaining infrastructure,” he added.
Another banker noted that some banks charge for ATM transactions beyond a certain number each month. Settlement and reconciliation expenses rise with low-value transactions. He noted that UPI may fail in such conditions.
Frauds rise
Low-value transactions may also increase fraud. Industry discussions may lead to government action. UPI is the leading digital payment method. In August, UPI reached a new milestone of 161 crore transactions, worth 2.98 lakh crore, according to National Payments Corporation statistics. The Central Board of Direct Taxes ordered banks to halt charging and reimburse from January 1 last month. It warned of penalties for such collecting.
“Banks are, therefore, advised to immediately refund the charges collected, if any, on or after January 1 on transactions carried out using the electronic modes prescribed under section 269SU of the IT Act, and not to impose charges on any future transactions carried through the said prescribed modes,” the CBDT said in an August 30 circular.
HDFC Bank, ICICI Bank, Kotak Mahindra Bank, and Axis Bank charged 2.5–5 for UPI-based payments above 20 per month. Public banks do not impose such fees.
