UPI (Unified Payments Interface) and Rupay Card have been a major contributor to promote digital payments in India. Millions of people are using UPI daily, but now reports of this service becoming expensive are coming out. The government has taken a big step in this direction, which will not only affect the customers, but the industry can also have a loss of about Rs 600 crore.
The government has recently announced a reduction of 60% in subsidies on UPI and RuPay card transactions. Till now this subsidy was given on small transactions, ie transactions of less than Rs 2,000, but now it has been reduced to Rs 1,500 crore. Last year this subsidy was Rs 3,681 crore. It is clear from this deduction that now customers may have to bear the burden of merchant discount rate (MDR).
Till now, UPI users did not have to pay any additional fee due to subsidy given by the government. But after this deduction in subsidy, charge can be increased on customers to compensate the damage to banks and payment gateways.
Experts believe that this decision of the government may cause a loss of about Rs 600 crore to the industry. Currently, about 17 billion transactions are currently through UPI, whose total value is Rs 24 lakh crore. If merchants are asked to pay a discount rate, it will directly affect traders and customers.
No clear information has been given by the government about the subsidy on RuPay Debit Card. In such a situation, it has to be seen whether the RuPay card users will also have to face additional fees.
After this decision, the question also arises whether the use of UPI will decrease. If additional charge is charged, digital payments may be expensive for small traders and common customers, making people return to cash.
The government believes that subsidy cuts will reduce the burden on the government treasury, but it can affect digital payment ecosystem. However, it remains to be seen how the industry and customers respond after the move.
The government has made several efforts to increase the use of UPI and RuPay cards, but subsidy cuts are likely to cost digital payments expensive. If this decision is not reconsidered, it can also affect the mission of Digital India.
