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Swipe fee debate extends to India

Shri Padmanabhan

On Monday, the Reserve Bank of India said that it is impractical for financial institutions to charge the same interchange fees — commonly referred to as swipe fees — for debit cards as charged on credit cards.

In India, the interchange fee is 1.1 to 1.2 percent for both credit and debit cards and is shared between the issuing bank, acquiring bank and the payment network, Business Standard reports.

RBI’s Executive Director Shri G. Padmanabhan argued that reduced fees on debit cards would lead more merchants across India to more widely accept electronic payments.

“We are saying that the debit card interchange fee should be lower because credit cards get paid after some time, whereas in debit cards, there is an instantaneous debit into my account,” Padmanabhan said, according to Business Standard. “Hence, logically, debit card charges should be lower.”

Padmanabhan also said that the RBI’s standard rule is to ensure the continued presence of payment systems while forgoing exclusivity, adding that the RBI also allows the market to set prices until that pricing no longer works.

Padmanabhan said underserved and underbanked areas may provide a solution to debit card issuers looking to increase business and revenue.

“Why can’t banks issue debit cards to no-frills account-holders as one can withdraw only up to the amount in his account?” Padmanabhan said, according to Business Standard.

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