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Businesses with Rs 50 crore annual revenue to be penalised for not providing RuPay, UPI

The government will charge a penalty of Rs 5,000 per day in case of failure to provide these platforms; the penalty will be applicable from February 1, 2020

twitter-logoBusinessToday.In | December 31, 2019 | Updated 13:25 IST
Businesses with Rs 50 crore annual revenue to be penalised for not providing RuPay, UPI
Nirmala Sitharaman last week announced customers and merchants will no longer pay MDR on payment via RuPay or UPI platforms

Businesses with turnover worth over Rs 50 crore will need to mandatorily provide UPI (Unified Payments Interface) and RuPay payment platforms to customers or merchants for making online payments, the government has said. Those failing to provide these facilities will be penalised. The finance ministry, in a notification, said: "No bank  or system provider shall impose any charge on a payer making payment or a beneficiary receiving payment, through electronic modes prescribed."

These platforms are offered by the National Payments Corporation of India (NPCI), an initiative of Reserve Bank of India (RBI) and Indian Banks' Association (IBA) to boost digital payments in India.

The ministry said a section, 271DB, has been introduced in the Finance Act, which provides for levy of penalty of Rs 5,000 per day in case of failure to provide these platforms. The penalty will be applicable from February 1, 2020.

Finance Minister Nirmala Sitharaman, in a review meeting with chiefs of Public Sector Banks (PSBs), Indian Banks' Association and representatives of leading private sector banks last Saturday, announced customers and merchants will no longer pay MDR (merchant discount rates) fee, a move that will provide a big boost to online transactions in India.

Also read: Govt bans levy of MDR fee on payment via RuPay, UPI; to boost cashless transactions

MDR is the cost paid by a merchant to a bank for accepting payment from their customers via credit or debit cards every time a card is used for payments in their stores. The merchant discount rate is expressed in percentage of the transaction amount. The MDR is distributed among three stakeholders - bank, PoS machine vendor and card companies - and varies from 0-2 per cent on credit card transactions.

So from January onwards, all companies with a turnover of Rs 50 crore or more need to provide the facility of payment through RuPay Debit card and UPI QR code to their customers, under which no MDR fee will be charged from customers as well as merchants. The RBI and banks will absorb these costs from the savings that will accrue to them on account of handling less cash as people move to the digital modes of payments.

Though the move will benefit customers, multinational electronic payments companies like Visa and Mastercard are likely to face losses. Experts believe the move could affect credit card companies in the long run as more people will be influenced to make payment through cheap UPI platforms.

Edited by Manoj Sharma

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