UPI free, but banks fix limits as norms clash

Even as transactions under the unified payments interface race towards the billion-a-day goal, a potential conflict brews between norms that require UPI to be free and RBI rules that allow banks to limit the number of withdrawals in a savings account.

This conflict can be overcome if the RBI takes over the costs of UPI payments just as it absorbs cost-of-currency transactions, according to a report. The report by IIT-Bombay’s Ashish Das says that some banks have limited the number of debits in savings accounts. For instance, Indian OverseasBank allows its savings account holders 50 free debit transactions in six months. Any withdrawal beyond this limit is charged at ₹5 per transaction. Canara Bank allows four free debits in its basic savings account.

While the central bank has remained quiet on limiting transactions, it had indicated that banks could cap the number of withdrawals in a savings account.

“On one hand, there is a regulation that advocates restrictions to the number of withdrawals, while on the other hand, the RBI, through their financial inclusion strategy, has a vision of usage of financial services and to take the country towards a cashless society through digital means. The two policies counteract each other,” the report said.

The report comes at a time when the RBI has sought feedback on payment charges. The government, meanwhile, is firm that UPI should continue to remain free. Privately fintech companies and banks have said that someone has to bear the cost of UPI transactions.