UPI needs budgetary support of Rs 2,500 crore to expand: IIT Bombay report

UPI needs budgetary support of Rs 2,500 crore to expand: IIT Bombay report

The government can nudge e-commerce merchants and encourage them to offer a discount for payments made through BHIM UPI

In order to maintain BHIM-UPI’s performance in terms of robustness and efficiency, banks and system providers will have to invest more towards upgrading their infrastructure and security, bring about product innovations (R&D) and further awareness among the people.

Unified Payments Interface (UPI), requires budgetary support of about Rs 2,500 crore annually from the government to further flourish, according to a report by the Department of Mathematics of the Indian Institute of Technology, Bombay, and this cost can be recouped by substantial savings in handling cash transactions.

There has been an uptick in digital transactions in the country, especially following the Covid-19 pandemic. UPI transactions breached the 2-billion mark in October with a value close to Rs 3.86 trillion.

In order to maintain BHIM-UPI’s performance in terms of robustness and efficiency, banks and system providers will have to invest more towards upgrading their infrastructure and security, bring about product innovations (R&D) and further awareness among the people.

“Ideally, expenditures to develop and promote asset-lite BHIM-UPI – an apposite digital alternative to cash – should be borne by the government and RBI,”

The report — Charging Consumers for Merchant Payments — also talks about the convenience fee and payment surcharge being charged from consumers by various financial operators and merchants and how they need to be done away with in order to promote more transactions over UPI.

The government can nudge e-commerce merchants and encourage them to offer a discount for payments made through BHIM-UPI.

“This would popularise the perfectly innovated ‘Made in India’ payments product – the BHIM-UPI,”

While RBI has taken several initiatives to promote awareness among consumers, it needs to do more to educate merchants and consumers about the rules, regulations and laws on payment-surcharging and the redressal mechanisms available.

UPI is gaining popularity with retail fruit and vegetable vendors, they still need to withdraw cash to be able to purchase their next day’s fruit and vegetable supplies from the mandis. “This is a classic example where, instead of cash, BHIM-UPI should be promoted for accepting sale payments at the Mandis, and for that, the Agriculture Ministry along with the Department of Financial Services should take some core initiatives.”