A small merchant discount rate (MDR) on UPI transactions is unlikely to have a major impact on transaction volumes, Reserve Bank of India Governor Sanjay Malhotra said on Wednesday, asserting that the central bank has so far seen no decline in volumes.
“As of now, we do not see any drop in volumes. And I don't personally think that a small fee will have a major impact on the volumes,” Malhotra told reporters at the RBI headquarters.
The government last month allowed the levy of MDR on UPI transactions above Rs 2,000, with a fee of 0.4 per cent.
Speaking hours after the RBI announced a rate hike and ruled out a rate cut, Malhotra said bank credit growth was expected to remain strong and support broader economic activity.
He said the RBI was mindful of the potential impact of excess liquidity on asset quality at non-bank lenders but did not expect such concerns to materialise.
System liquidity, he said, was unlikely to remain at the high surplus levels witnessed over the past few weeks for an extended period.
Malhotra also cited the response to the FCNR(B) deposit scheme, under which banks raised nearly USD 133 billion from the diaspora through a concessional swap facility, as evidence of India's strong macroeconomic fundamentals.
He expressed confidence that banks would deploy the funds prudently.
On the external sector, Malhotra said global headwinds had led to a decline in capital flows and exerted temporary pressure on the current account. He expressed confidence that the balance of payments would soon return to surplus, citing several supporting factors.
(With inputs from PTI)
