Monday, May 27, 2024
Home > Finance News > Banks cautioned against imposing levies like MDR on electronic transactions

Banks cautioned against imposing levies like MDR on electronic transactions


Banks have been cautioned against imposing charges such as MDR or merchant discount rate on electronic transactions including Unified Payments Interface (UPI). Finance ministry may take action against banks not adhering to the direction.

Central Board of Direct Taxes has also directed banks to refund charges since January 1, 2020, collected on transactions carried out using electronic modes including UPI by businesses having turnover of over Rs 50 crore.

“There have been some representations that some banks are imposing and collecting charges on transactions carried out through UPI… Such a practice on part of the banks is a breach of Section 10A of Payments and Settlements Systems Act,” the Board said in a note on Sunday.

Any charge including MDR or merchant discount rate, shall not be applicable on or after January 1, 2020 on payments made through electronic modes, the Board said, adding that a certain number of transactions have been allowed free by banks beyond which every transaction would bear a charge.

The finance ministry sources said that action will be taken against those banks. “Banks are again advised by the finance ministry today not to collect any charge on transactions or payments made through electronic mode,” they said.

Finance secretary Ajay Bhushan Pandey had said in July that UPI transactions in 2020 had overtaken transactions done via debit card and cash withdrawals. “In June 2020, 134 crore transactions were done valued at Rs 2.62 lakh crore, 78% higher than 75 crore transactions in June 2019,”he had said.

Experts said the directions were welcome step from the government, at a time when contactless payment mechanisms continue to be on the rise amid spread of the Covid-19 pandemic.

“UPI has been a key enabler of the digitisation of the economy,” said Amit Maheshwari, partner at consultancy firm AKM Global. “This advisory is directed to banks which have imposed these charges and have been asked to refund them immediately.”

They flagged however that processing of refund of charges and non-imposition in future on transactions could mean an added burden on the banking system handling transactions via RuPay or UPI, right from initiation to settlement of such payments.

“Guidance in this regard from RBI and ministry of finance would be highly appreciated,” said Sandeep Jhunjhunwala, Partner, Nangia Andersen LLP.


Source link

Leave a Reply

Your email address will not be published. Required fields are marked *