After the Central Board of Direct Taxes (CBDT) asked banks to refund charges collected from their customers and merchants for making Unified Payment Interface (UPI) transactions in 2020, a few banks have removed the details of UPI transaction charges from their websites.

ICICI bank and Axis bank have removed the details of UPI transaction charges from their websites but HDFC bank and
Kotak Mahindra Bank have not.

Private sector lender, ICICI Bank mentions ‘NIL’ under charges for UPI transactions on its website. The Axis Bank website shows an error message when you go to the ‘Change in charges for UPI’ page.

According to the CDBT’s circular issued on Sunday, “Such charges violate the law. The lenders are asked to stop all such impositions or face “penal actions. Any cap on free UPI transactions is a breach of the PSS and IT Act.”

When banks started charging for UPI transfers
Few months ago, some large private banks introduced charges, ranging from Rs 2.5 to Rs 5, on person-to-person payments using UPI beyond 20 times a month. These included private lenders like Axis Bank, HDFC Bank, ICICI Bank and Kotak Mahindra Bank. ICICI Bank and HDFC Bank started levying these charges from May 3, 2020, while Axis Bank and Kotak Mahindra Bank had introduced charges from June 1, 2020, and April 1, 2020, respectively.

However, leading public sector banks hadn’t levied charges on UPI transactions, i.e., they were still free of cost.

Banks to refund customers
As per the CBDT circular, “Banks are… advised to immediately refund the charges collected, if any, on or after January 1, 2020, on transactions carried out using the electronic modes… and not to impose charges on any future transactions carried through the said prescribed modes,” it said. “There have been some representations that some banks are imposing and collecting charges on transactions carried out through UPI… Such practice on part of the banks is a breach of Section 10A of Payments and Settlements Systems Act… Such breach attracts penal provisions under Section 271 DS of the IT Act as well as Section 26 of the PSS Act.”

Here is a look at which banks have removed transaction charges from their websites and which ones have not.

These banks have not removed transaction charges from their websites
1. HDFC Bank

2. Kotak Mahindra Bank

These banks have removed UPI transaction charges from their websites
3. ICICI Bank

4. Axis Bank

Why banks had started charging for UPI fund transfers?
According to a Times of India report, although the government has said that payments using UPI would be free, bankers say that the charges have been introduced to prevent frivolous transactions from putting a load on the system.

Pranjal Kamra, CEO, Finology, a Raipur-based Fintech firm, corroborated this: “Transaction volumes have increased largely post demonetisation. Currently, banks are bearing the cost of UPI transactions, so there was a need to put some charges on UPI to maintain the infrastructure. And since more than often the transactions are not genuine, it creates unnecessary pressure on the server. The fee will discourage unnecessary transactions and will improve the quality of service.”

Kamra added that the Reserve Bank of India or National Payments Corporation of India have not explicitly indicated that banks cannot charge for UPI transactions. “That is why the banks’ reserve the right to charge users for such transactions. Further, if the user percentage does not decrease with the big banks imposing UPI rates, the small banks too will follow the trend,” he explained.

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