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RBI working on reducing transaction fees, UPI for feature phones: Governor Shaktikanta Das

Addressing concerns regarding transaction fees and inclusivity of digital payments is crucial, but payment frauds go hand-in-hand with growth in digital payments.

The Reserve Bank of India (RBI) is working on enabling UPI transactions on feature phones to make digital payments more inclusive, the RBI governor Shaktikanta Das said in a speech on 8 December 2021. The central bank is also considering a discussion paper to reduce the transaction fee charged on card and UPI payments, the governor revealed.

Speaking about reforms in UPI, Das also announced plans to introduce an ‘on-device wallet’ in UPI apps and increase the UPI transaction limit for IPO applications.

As digital payments take off rapidly in India, addressing concerns regarding transaction fees and inclusivity is increasingly more crucial. The flipside, however, is that payment frauds go hand-in-hand with growth in digital payments.

What’s RBI’s plan for the future of digital payments?

The RBI governor mentioned a few plans for the future in terms of digital payments:

  • Transaction Fee: “There have been some concerns on the reasonableness of various charges incurred by customers for digital payments through credit cards, debit cards, prepaid payment instruments (cards and wallets), Unified Payments Interface (UPI) and the like,” the governor said, adding that the RBI might release a discussion paper to make digital transactions more affordable.
  • UPI Payments: Under enhancements in UPI, the governor mentioned three separate efforts:
    • Launching UPI-based payment products for feature phone users using RBI’s regulatory sandbox on retail payments
    • Improving the process-flow for small transactions through an on-device wallet in UPI apps
    • Increasing the UPI transaction limit for investments in IPOs from Rs. 2 lakh to Rs. 5 lakh

The full speech by the governor is available here:

Number of payment frauds increase with growth in digital payments

While the RBI’s moves to facilitate cheaper and more inclusive digital payments are welcome, concerns remain regarding the rapidly growing instances of digital frauds, which often go hand in hand with a growth in digital payments.

In response to a question regarding digital payment frauds in the Lok Sabha, the Ministry of Finance recently released state and state-wise fraud data obtained by the RBI:

  • Consistent increase in card-based payment fraud: Almost all states have seen an exponential increase in frauds on card-based payments and internet banking between 2016 and 2020, the data suggests. Only 393 cases of fraud were reported in Haryana in 2016, for example, but that number went up to 5,605 in 2020. Number of frauds in Tamil Nadu increased from 540 in 2016 to 7,416 in 2019.
  • Highest fraud rates in Maharashtra: In terms of both the number of frauds and the amount involved in such frauds, Maharashtra exceeds all other states by a significant margin. The country has seen 26,522 cases of fraud in the last financial year, involving a total amount of 67 crores. The next highest number was in Delhi, with a total of 7,774 reported cases. Other states with high numbers of reported fraud include Gujarat, Haryana, Karnataka, and Tamil Nadu.

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