RBI seeks feedback on payment charges
On August 17th, the RBI released a “Discussion Paper on Charges in Payment Systems” which is open for public feedback until October 3, 2022. The paper is a comprehensive, excellent resource on the components of India’s digital payments ecosystem. Around 40 questions have been raised covering RTGS, NEFT, IMPS, debit and credit cards, PPI, UPI, intermediaries, convenience fees and other charges. The RBI has clearly stated that it has neither taken any view nor has any specific opinion on the issues raised in this discussion paper.
The first public feedback came from the Ministry of Finance in a tweet on Sunday night (August 21st) stating that UPI is a digital public good, will remain free and the government is committed to providing financial support towards this end. However, Vishwas Patel, Chairman Payments Council of India tweeted in reply immediately that the government support given so far has not been passed on by the banks. A few days later, NPCI instructed apps not to collect charges for payments through BBPS. Read Monisha Purwar in the Financial Express on the debate around charges for UPI.
Even with zero charges for customers, the phenomenal success of UPI in popularizing digital payments has not touched the vast swathes of India. There are of course new offline and feature phone modes being pushed by NPCI like UPI123Pay – the latest is RBI's approval to Crunchfish and HDFC Bank to test an offline retail payment solution in the Regulatory Sandbox. Indradeep Ghosh, Dvara Research has written on the way forward using digital payments to advance financial inclusion, where he points to two main challenges to overcome – unfavourable economics in reaching the poor and ill-suited digital payment interfaces. Further, an effective grievance redressal system is critical for digital payments to lead to financial inclusion of majority Indians.
The RBI released its report on the implementation of recommendations of the Working Group on digital lending. Detailed instructions were set out by the RBI in a circular, with November 30 as the deadline for compliance by registered entities. The overarching principle behind the guidelines is to promote innovation, while restricting scope for exploitation of customers. However, as Jaspreet Kalra writes, the guidelines are set to change business models by limiting the kind of information fintech platforms can collect. There are also several dissenting voices in industry claiming that heightened compliance will deter the growth of digital lending, and put a spanner in inclusion through innovation.
It's a tough line to tread for a regulator but finally, we seem to be looking towards a space where customers are better protected, even as the pace of lending may slow down.
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