You still bear e-pay surcharge on govt & utilities websites

RBI Directive Bars This Fee Being Passed On To Customers

Several government agencies and public utilities are disincentivising epayments by refusing to bear transaction costs charged by banks even as the Modi administration promotes digital India. Banks are passing on the cost of online payment to customers in several e-portals. In some cases, not only are charges being illegally passed on, the amount is also higher than what banks are allowed to charge merchants as fees.


Electricity consumers in Delhi have to pay 1% extra on their bill amount when they make payments through UPI. Consumers of Tata Power end up paying a surcharge when their bills are over Rs 2,000 in Mumbai and Rs 5,000 in Delhi. For train tickets booked on IRCTC, the most widely used e-commerce portal, customers are charged Rs 10 plus GST for UPI transactions over Rs 2,000. These are only illustrative examples and there are many other instances of agencies where the surcharge is passed on to customers.

A study on surcharges in digital payments by Ashish Das, department of mathematics, IIT-Bombay, has shown that despite a well-meaning policy and directives against passing on the surcharge to customers by the RBI, banks continue to facilitate surcharging. “Unauthorised surcharging has also burdened payment system users with huge additional costs. Just for online payments, it has led to extortions by the acquirer banks and their payment facilitators/aggregators to Rs 200 crore in 2018 alone,” said Das in the report.

The surcharge that is passed on to the customer is illegal. The RBI, in a notification on December 27, 2017, had asked banks to ensure that merchants do not pass on MDR (merchant discount rate) charges to customers while accepting payments through debit cards. The government extended this norm to payments under UPI as well.

According to Das, the surcharge is different from a ‘service charge’ or a ‘convenience fee’ that merchants are allowed to charge. Unlike a convenience fee, which is flat across all modes of payment, the surcharge varies depending on the mode of payment with credit cards attracting the highest surcharge. Also, in most of these cases the utility or government agency displays the actual billed amount while the bank deducts the billed amount plus surcharge. The report recommends that the government and the RBI take steps to ensure that consumers do not end up bearing the surcharge in electronic payment transactions. It also recommends that in credit cards, the cost of credit should be borne by the customer and not the bank.

Payment companies like Visa, Mastercard and RuPay impose caps on the card issuing bank on the maximum they will get in certain payments like government departments and MFs.