Credit Card Fees Issues; RBI invites inputs for cap; UPI May be charged; Details Here!!

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RBI invites inputs for cap on Credit Card Fees
RBI invites inputs for cap on Credit Card Fees

RBI invites inputs for cap on Credit Card Fees; Details Here!! The Reserve Bank of India (RBI) has identified credit card fee capping as one of the problems to be taken into consideration in a discussion paper on charges in the payments system. The same cap that the RBI imposes on debit card fees may be extended to credit card costs, and banks may decide to tack on a 30-day interest charge. The report suggests substituting a subsidy for the zero costs on Unified Payments Interface (UPI) transactions. Additionally, it has asked for views regarding whether UPI transaction fees should be a flat rate or based on a percentage of the transaction value.

By October 3, 2022, the Central Bank has requested comments on the discussion paper. The central bank has never previously discussed limiting credit card fees. In the past, the central bank has set a limit on debit card fees while keeping UPI transactions free.

The study also mentions surcharges as a problem. The process of passing credit card fees from the business to the client is referred to as a surcharge. When accepting credit card payments is not profitable for the business, some nations permit small business owners to pass on credit card surcharges to the client. “Easing frictions that may result from systemic, procedural, or revenue-related concerns has been the focus of RBI’s work in the payment systems. While there are numerous middlemen in the payments transaction chain, the RBI stated that the majority of customer complaints are related to expensive and opaque fees.

The goal, according to the RBI, is to guarantee that fees for payment services are fair and set by competition for customers while simultaneously offering the intermediaries the best possible revenue stream.

The RBI Stated:

“To establish this balance, it was considered useful to carry out a thorough examination of the various costs incurred in the payment systems by highlighting different dimensions and collecting stakeholder opinion.

The discussion paper covers all issues pertaining to fees for payment systems [such as Immediate Payment Service (IMPS), National Electronic Funds Transfer (NEFT) system, Real Time Gross Settlement (RTGS) system, and UPI] and different payment methods, including debit cards, credit cards, and prepaid payment methods (PPIs). Policy and intervention strategies would be based on the comments gathered.

The maximum cost, known as the merchant discount rate, or MDR, that businesses pay banks for debit card transactions is currently set based on the volume of business and size of the transaction. Banks are only permitted to charge a maximum of 0.9%. To offset the 30-day free interest that banks offer on credit card transactions, the RBI has justified an extra fee as a percentage of the transaction value. Follow our site for daily updates regarding this and job notification.

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