MUMBAI: The Reserve Bank of India (RBI), in a discussion paper on charges in payment systems, has flagged credit card fees as an issue to be considered. According to the report, the same limit reserve Bank of India Debit card fees can be applied to credit cards, and banks can add a 30-day interest to that fee.

The paper proposed replacing zero charges on Unified Payments Interface (UPI) transactions with a subsidy. It has also asked for suggestions as to whether the allegation is i Transactions must be a flat fee or based on a percentage of the transaction value.

The Central Bank has called for a response to the discussion paper by October 3, 2022. This is the first time the central bank has talked about regulating credit card charges. In the past, the central bank slashed debit card charges, while keeping UPI transactions free.

Currently, the maximum fee — the merchant discount rate, or MDR — that shops pay to banks on debit card transactions is capped based on merchant turnover and transaction size. The maximum bank can charge is capped at 0.9%. RBI has justified an additional charge, as a percentage of the transaction amount, to cover the 30-day free interest the bank offers on credit card transactions.

Another issue flagged by the paper is that of overload. Surcharge refers to the process of transferring credit card charges from merchant to customer. Some countries allow small shop owners to pass on a credit card surcharge to the customer to give them the option of paying by credit card where it is not economical for merchants to accept card payments. “The RBI initiatives in payment systems have been focused on minimizing friction that may arise from systemic, procedural or revenue-related issues. While there are multiple intermediaries in the payment transaction chain, consumer complaints are generally about high and non-transparent charges,” the RBI said. As per the RBI, this is to ensure that charges for payment services are charged fairly and competitively. Users while providing an optimum revenue stream for intermediaries. RBI said, “To ensure this balance, comprehensively examine the various charges levied across payment systems by highlighting the various dimensions and seeking stakeholder feedback. The review was considered useful.”

Discussion paper covers all aspects related to fee 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 will be used to guide policies and intervention strategies.