Finance

UPI crosses record 1.5 billion transactions in August, shows latest RBI data

Mumbai: The Unified Payments Interface (UPI) has, for the third consecutive month, clocked record volume in August, processing over 1.5 billion transactions for the first time.

The latest Reserve Bank of India data showed that 1.56 billion transactions worth Rs 2.85 lakh crore were recorded on NPCI’s popular digital channel, as on August 30, smashing the previous record of 1.49 billion transactions worth Rs 2.90 lakh crore for the month of July.

At the same time, cash withdrawals in August through ATMs and micro-ATMs at Rs 1.36 lakh crore is less than half of payments through UPI, the preliminary central bank data showed.

rgnrsnr

Industry experts said that while the surge in UPI-based micro-transactions could help India achieve its stated objective of transforming into a cashless economy, banks would be nervously monitoring the rising volumes of low-ticket fund transfers.

This is because the incremental costs of processing such “low-ticket, high-frequency” payments are rather high, without a proportionate fee-based compensation, as these banks must constantly upgrade their backend systems and monitor fraud risks in line with the rising transaction load.

“It is likely to increase the server load on banking systems as UPI transactions continue to grow at a significant rate. This could lead to high infrastructure costs for banks,” said Vivek Belgavi, fintech leader, PWC India.

To be sure, banks cannot charge customers for UPI payments as per the zero MDR policy introduced in the 2019 Finance Bill. This was reiterated by a circular by the Central Board of Direct Taxes (CBDT) on Sunday after it came to notice that some private sector banks had introduced caps on free transactions.

Private lenders such as HDFC Bank, ICICI Bank, Axis Bank and Kotak Mahindra Bank had introduced charges on UPI transfers beyond 20 transactions a month. These banks have now been asked to refund their customers the levied fees on grounds that such charges violate the law.

Let’s block ads! (Why?)

Banking/Finance-Industry-Economic Times

Leave a Reply

Your email address will not be published. Required fields are marked *