UPI Should Be Free Forever And Banks Are Already Paid 100 Times Over.
RBI asks should we charge for UPI at 10 lakh crore rupees per month. Deepak Shenoy says big NO. Banks take your savings, pay you 3.5 percent, earn 5.15 percent overnight and way more on lending. Float income is 85,000 to 100,000 crore plus per year. UPI cost is just 400 crore.
Here is the breakout 👇
1/ Why free matters.
You give banks money to withdraw when you like. If they charge you to take your own money, you will go to cash. Government hates cash because it creates black money. RBI hates it because banks lose money to lend.
2/ The real math.
- Float income from CASA is nearly 140,000 crore rupees for banks.
- NPCI which runs UPI, IMPS, CTS, ATM switch spends only 680 crore per year. Core UPI cost max 400 crore a year.
- Government already pays banks 1,300 crore per year subsidy for UPI.
- RBI spends 4,984 crore just printing currency notes. So UPI is cheaper than cash.
- NPCI is not for profit but earns 1,200 crore revenue, 400 crore net profit, 40 percent margin.
3/ History proves free works.
- 2008 RBI made ATM transactions free because banks charged random fees.
- 2008 RBI cut outstation cheque fee from 0.4 percent to 1 percent of value down to Rs 50 to Rs 150. Cheque truncation cost now Rs 0.50 to Rs 1.00 per cheque.
- 2019 RBI made NEFT RTGS free for banks and then mandated free for savings customers online. RTGS above Rs 200,000, mostly free, max Rs 50.
4/ Cards vs UPI.
- 92 crore debit cards, 8 crore credit cards, only 65 lakh POS terminals.
- Cards charge merchants up to 2 percent, debit 0.4 percent. Small kirana margin 5 to 8 percent, cannot pay.
- UPI is 8.5 lakh crore per month P2P between individuals. That bulk is retail.
5/ Why charging merchants kills it.
- Merchant doing less than Rs 2,000 per transaction cannot sustain 0.5 percent fee, that is 10 percent of margin.
- If you charge after 20 transactions or above Rs 2,000, they will go back to cash from 21st transaction. Government made cash above Rs 20,000 illegal, so payments must be free.
6/ Innovation happened while free.
- Since 2020 UPI made free by Parliament under Payments and Settlements Act. RBI cannot charge without changing Act.
- Innovation while free: IPO payment via UPI, mutual fund investment, credit disbursement and repayment, govt bonds via RBI. Like internet protocols, free drives more use.
- GPay PhonePe knew UPI is free and still built businesses. They give cashbacks, earn via ads, platform fee, BBPS bill payments, lending.
👉 Bottomline : UPI is digital public good like city roads, not toll roads. Float income is 50x to 100x UPI cost. Charge retail and people run to cash. Keep it free, keep India digital.