New Delhi: Reserve Bank of India (RBI) Governor Sanjay Malhotra on Wednesday said that adding a fee, called the Merchant Discount Rate (MDR) to UPI transactions will probably not cause a big drop in transaction volumes.
As of now, RBI does not see any drop in volumes. RBI also does not personally think that a small fee will have an impact on volumes, Malhotra told reporters at the RBI headquarters in Mumbai.
The government has allowed the charging of MDR on UPI transactions with transactions above Rs 2,000 attracting a fee of 0.4 percent.
After announcing the repo rate hike Malhotra speaking to reporters said bank credit growth will remain strong and will continue to support economic activity.
Malhotra also said the RBI is aware of the impact of excess liquidity on asset quality at non-bank lenders. However, the RBI does not currently expect such a situation to emerge.
The Governor said the financial system will probably not remain in a high surplus liquidity position for a period as seen over the past few weeks.
Malhotra also pointed to the FCNR(B) deposit scheme, under which banks raised USD 133 billion from the Indian diaspora through a concessional swap facility as an indication of India’s macroeconomic fundamentals strength.
Malhotra said the RBI was confident that banks would deploy the funds prudently.
On pressures Malhotra said global headwinds had caused a decline in capital flows but Malhotra maintained that pressure, on the current account was temporary.
Malhotra expressed confidence that the Balance of Payments would return to surplus soon, citing factors that support the outlook.
Malhotra, however, declined to comment on the RBI’s decision regarding Tata Sons’ request to surrender its NBFC licence and the regulator’s direction for the company to comply with upper-layer NBFC listing norms.
