RBI Invites Inputs for Cap on Credit Card Fees
Moneylife Digital Team 19 August 2022
The Reserve Bank of India (RBI), in a discussion paper on charges in the payments system, has flagged capping credit card fees as one of the issues to be considered. According to the report, the same limit the RBI applies on debit card fees could be made applicable to credit cards, and banks could add 30- day interest to that charge. The paper proposes replacing the zero fees on Unified Payments Interface (UPI) transactions with a subsidy. It has also called for suggestions on whether the charges on UPI transactions should be a flat fee or based on a percentage of the transaction value. The central bank has called for feedback on the discussion paper by 3 October 2022. This is the first time the central bank has talked about regulating credit card charges. In the past, the RBI had capped debit card charges while UPI transactions were kept free.
 
Currently, the maximum fee — merchant discount rate, or MDR — that shops pay banks on debit card transactions is capped depending on the merchant turnover and size of transaction. The maximum banks can charge is capped at 0.9%. The RBI has justified an additional charge as a percentage of the transaction amount to cover the 30-day free interest that banks provide on credit card transactions. 
 
Another issue flagged by the paper is that of surcharges. Surcharge refers to the process of transferring the credit card fees from the merchant to the customer. Some countries allow small shop owners to pass on credit card surcharges to the customer to give them a choice to pay by credit card where it is not economical for the merchants to accept card payments. 
 
“The focus of RBI’s initiatives in the payment systems has been to ease frictions which may arise from systemic, procedural or revenue-related issues. While there are many intermediaries in the payments transaction chain, consumer complaints are generally about high and non-transparent charges,” the RBI said.
 
The objective, according to the RBI, is to ensure that charges for payment services are reasonable and competitively determined for users while also providing an optimal revenue stream for the intermediaries. 
 
“To ensure this balance, it was considered useful to carry out a comprehensive review of the various charges levied in the payment systems by highlighting different dimensions and seeking stakeholder feedback,” the RBI said. 
 
The discussion paper covers all aspects relating to charges in payment systems [such as Immediate Payment Service (IMPS), National Electronic Funds Transfer (NEFT) system, Real Time Gross Settlement (RTGS) system and UPI] and various payment instruments including debit cards, credit cards and prepaid payment instruments (PPIs). The feedback received would be used to guide policies and intervention strategies.
 
Comments
RBI Cancels Licence of Deccan Urban Co-operative Bank
Moneylife Digital Team 19 August 2022
The Reserve Bank of India (RBI) on Thursday said the licence of Deccan Urban Cooperative Bank, Karnataka, has been cancelled as the lender does not have adequate capital and earning prospects. As per the data submitted by the bank,...
Banks Hike Deposit Rates Ahead of Festive Season
IANS 18 August 2022
Most banks are increasing their deposit rates for boosting deposits to support rising credit offtake as liquidity in the banking system has narrowed.
 
The hike in deposit rates is in line with the Reserve Bank of India's...
Forgery Racket Unearthed after HDFC Bank Finds 33 Accounts with 2 Common Pictures
IANS 11 August 2022
The IFSO (Intelligence Fusion and Strategic Operations) unit of Delhi police's special cell has busted a gang of cheats who were engaged in duping the HDFC Bank by opening accounts on the basis of forged documents, and arrested two...
312 Big Wilful Defaulters Owe Rs1.41 Lakh Crore to Public Sector Banks; Here Is the List of Bank Defaulters
Yogesh Sapkale, 10 August 2022
While public sector banks (PSBs) continue to refuse to share names of big defaulters citing 'confidentiality of customer data', information shared by the Reserve Bank of India (RBI), reveals that just 312 big defaulters owe more...
Free Helpline
Legal Credit
Feedback