Digital payments have increased in the months of lockdown. Private banks are charging different processing fees on these transactions. It is also being charged on small digital payments. Those doing so include HDFC Bank, Axis Bank, ICICI Bank and Kotak Mahindra Bank. Experts say that other banks can do this by looking after them.
The volume of digital transactions has increased significantly during lockdown. At the same time, the private banks are putting the burden of loss on the loss due to free processing of digital transactions. These banks have started charging different types of processing fees for digital payments of high frequency and small amounts. HDFC Bank, Axis Bank, ICICI Bank and Kotak Mahindra Bank have all done so.
The banker and the payment executive said that last year the government had eliminated the merchant discount rate (MDR) on the Unified Payment Interface i.e. UPI. Due to this, banks have to make their digital strategy on the same lines. They want to compensate for the loss of earnings from this fee. Apart from this, the huge increase in digital volume on backend systems is also making them think about the mathematics of payment.
MDR (Merchant Discount Rate) is the fee that bank merchants charge for processing digital payments. The government had decided not to take this fee on UPI and Rupees last year.
HFDFC Bank has started charging a flat 10 rupees surcharge for its internet banking services. It is being taken on small transactions such as payment of mobile phone bill, recharge prepaid wallet and payment to internet service providers.
Meanwhile, Axis Bank, ICICI Bank and Kotak Mahindra Bank have also started charging processing fees for transferring payments from UPI. It is taken after the expiry of the monthly limit of 20 transactions. Banks have started charging Rs 2.5 on peer-2-peer transfers of less than Rs 1000. At the same time, this fee is Rs 5 for the rest.
n April, Kotak Mahindra set a limit of 20 free transactions. At the same time, ICICI Bank in May and Axis Bank did this in June. Responding to ET’s mail, the spokesperson of Kotak Mahindra said that this fee is being charged so that the UPI system cannot be misused. Most customers perform 5 to 10 transactions a month.
Experts say that in the coming months, more banks can start taking ‘convenience’ and ‘processing fees’. For this, it is important that the government and regulators find a way to compensate for their expenses.
Naveen Surya, Honorary Chairman of the Payment Council of India, said, “The payment business has been of no use due to the decision not to take MDR. There is no use of installing or upgrading infrastructure in it.