Mumbai, 07 October (H.S.): Reserve Bank of India (RBI) Governor Sanjay Malhotra said on Wednesday that imposing a nominal fee on Unified Payments Interface (UPI) transactions in the form of a Merchant Discount Rate (MDR) would not have any significant impact on the volume of UPI transactions.

Malhotra said capital inflows had declined due to global challenges, while pressure on the current account was a temporary issue. He expressed confidence that the balance of payments would soon return to a surplus position.

Addressing a press conference at the central bank's headquarters following the Monetary Policy Committee's (MPC) bi-monthly review, Malhotra said, “At present, we are not seeing any decline in transaction volumes. Personally, I do not think a nominal fee will have any significant impact on the volume of transactions.”

Malhotra said credit growth by banks was expected to remain strong and would continue to support broader economic activity. He added that the RBI was aware of the potential adverse impact of excess liquidity on the asset quality of lending-focused non-banking financial companies (NBFCs).

However, he made it clear that the central bank did not expect such a situation to develop. He said banks had witnessed surplus liquidity over the past few weeks, but the situation was unlikely to persist for an extended period.

Malhotra also said that around USD 133 billion had been mobilised from non-resident Indians under the concessional swap facility. According to him, the strong response reflected the resilience of the Foreign Currency Non-Resident (Bank) [FCNR(B)] scheme as well as the strength of India's broader macroeconomic fundamentals.

The National Payments Corporation of India (NPCI) had announced last month a 0.4 per cent MDR on person-to-merchant UPI transactions exceeding Rs 2,000. The charge is to be levied on merchants.

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Hindusthan Samachar / Jun Sarkar