Banks fix limits on UPI as conflict brews over cost of transactions: Report

While the unified payments interface (UPI) transactions race to reach a billion transactions per day mark, a potential confrontation has been developing between regulations that call for UPI to remain free and Reserve Bank of India regulations that permit banks to cap the number of withdrawals from savings accounts. According to research by Ashish Das of IIT-Bombay, this disagreement can be resolved if the RBI assumes responsibility for UPI payment costs in the same way that it does for currency transaction costs. According to the report, certain banks have restricted the number of debits made to savings accounts. The report comes as the RBI is looking for feedback on payment fees. The government, on the other hand, is adamant that UPI should retain its freedom. Although the central bank has not commented on restricting transactions, it had previously suggested that banks could set a limit on the number of withdrawals from savings accounts. Fintech firms and banks have stated that UPI transaction costs must be borne by someone, at least for merchant payments. The research reads, “On the one side, there is a regulation that supports limiting the number of withdrawals, but on the other, the RBI has a goal for using financial services and moving the country toward a cashless society through digital methods through their financial inclusion agenda. The two policies conflict with one another.” Das further stated that the government should develop a more robust strategy to maintain support for UPI transactions considering that UPI has proven to be the greatest cash substitute for offline peer-to-merchant payments. As a reason, he noted, “The printing and administration of currency have come at a great expense to the government and RBI. They have spent an average of Rs 5,400 crore per year on printing and significantly more on monetary management over the last few years. The cost of using UPI might be substantially cheaper, and it might even reduce the cost of using cash.” Looking at the present scenario, there are several banks which have already limited their saving account holders’ UPI transactions. Customers of savings accounts at Indian Overseas Bank are allowed to make 50 free debit transactions every six months. Any withdrawals made in excess of this are subject to an extra charge of Rs. 5 per transaction. Canara Bank offers four complimentary debits for its basic savings account holders. Read all the Latest News , Trending News ,  Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.