RBI has called for comments on charges on payment systems
The Reserve Bank of India released a Discussion Paper on Charges in Payment Systems on August 17, 2022. The RBI paper, seeking feedback on the fee structure for a range of digital payment services, is open for comments till October 3. It was perceived that the RBI is likely to introduce charges for Unified Payments Interface which is free now. It is not clear why RBI has sought public opinion on this, as hitherto RBI has not sought any public opinion on charges on NEFT or RTGS transactions or for various service charges levied by different banks. Immediately, the Government clarified that there is no such move with the government to levy any charges on UPI services. In a tweet, the Finance Ministry said “UPI is a digital public good with immense convenience for the public productivity gains for the economy”. There is no consideration in the Government to levy any charges for UPI services.
The concerns of the service providers for cost recovery have to be met through other means. There seems to be a difference of opinion between the Government and the RBI on the issue and it has come to the public domain. The RBI has also come out with a study paper titled ‘Privatisation of Public Sector Banks: An Alternate Perspective on August 18, 2022. As the title itself suggests it is an ‘Alternate Perspective’. It means that it is contrary to the existing perspective. The government a number of times through different agencies and through officials informed that they intend to privatise government banks. Sometimes they say that they want to privatise all banks and some other times they say that they intend to privatise some two or three. When bank unions sought categorical assurance from the government that government banks will not be privatised, it was not acceded to and the bank unions continue their agitation which is inclusive of strike action. The concluding part contains the following assertions “a big bang approach of privatization of these banks may do more harm than good”. “This article provides an alternative view with evidence that public sector banks are not entirely guided by the profit maximization goal alone and have integrated the desirable financial inclusion goals in their objective function unlike PVBs” and “Despite the criticism of weak balance sheets, data suggests that they weathered the Covid-19 pandemic shock remarkably well”.
There is a possibility that the above assertions may not be convenient to the government. When the contents were widely discussed, the RBI itself came out with a clarification immediately stating that the views expressed in the article are those of the authors and do not represent the views of the Reserve Bank of India. The RBI did not stop with that. It further highlighted some points from the conclusion of the report, which may be to show that the Central Bank is in tandem with the government's views. If the report does not represent the views of the RBI, why should they elaborate on that?
Here again, it seems that the RBI has attempted some damage-control exercise. Autonomy of RBI is important for orderly conduct of financial intermediation and financial markets; independence of financial regulators is important. There is no doubt that the Central Government is supreme as Section 7 of the RBI Act, 1934, provides for “Management — (1) The Central Government may from time to time give such directions to the Bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interest.”
But it is also true that, as provided by the Allahabad High Court in its order dated August 28, 2018 “The Central Government, however, is not expected to issue any directions, as contemplated under Section 7(1), indiscriminately or randomly. Such directions are possible when there exists sufficient material in support.”
(The author is a retired banker)