Srinagar: Jammu and Kashmir Bank Managing Director and CEO Amitava Chatterjee on Thursday defended the surcharge on UPI transactions above Rs 2,000, saying it was necessary for maintaining the fledgling system.
Chatterjee said it is a misconception that someone is trying to earn from the UPI transaction surcharge.
“You can understand the magnitude of the transactions that take place through a system. It is very costly. If you continue it free of cost, it will not be sustainable in the long run. Who is going to pay? So the charges are meant actually for sustenance of this system, which has done so well. It is essential. If we do not charge this now, it may not sustain for a longer period,” Chatterjee told PTI.
The J&K Bank CEO said the UPI has become an integral part of lives in India now. “I don’t remember ever in the past that I would (think to) walk out of my home planning to do some shopping and go and have dinner at a restaurant without carrying anything other than my mobile phone.”
On the drop in UPI transactions, Chatterjee said it might happen initially but these transactions are here to stay. “Initially, it might fall, but it is still cheaper than transacting through cheques or credit cards. It still remains the cheapest form. So there is an initial hiccup, maybe.”
Chatterjee said transactions below Rs 2,000 are still free and these form the major part of the dealings. “I think up to Rs 2,000 is the major part of the transactions. If you consider the percentage of transactions up to Rs 2,000, it is the major one. That is still free. Over Rs 2,000, they are charging. It may impact for a brief period, but it will not ultimately.”
On the J&K Bank posting 10.60 percent profit growth in Q2, Chatterjee expressed satisfaction, saying the bank was on course to achieve the target of Rs 5 lakh crore business by 2030.
Asked about deposits not growing in line with advances during Q2 of the current fiscal year, he said this is an industry-wide phenomenon. “If you look at all the banks, this has been the phenomenon for almost 6 to 10 quarters now. Why is it happening? Deposits are going to the mutual funds.
“The savings which the banks depended on, the household savings, a major portion of that is now slowly moving towards capital markets through the mutual funds. So this is going to continue. I mean, there is no way we can stop it.”
Chatterjee said this is bound to happen as a developing economy moves toward a developed economy. “There will be a time when banks will have to reduce their dependence on deposits to lend; they will have to borrow to lend. So the impact of that will be on the margins; margins will shrink,” he said.
Chatterjee said that as India has become a consumption-based economy, borrowing has become part of everyone’s life. “If you ask any middle-income group household about their expenses, EMIs are a major portion of it. They’ll be paying EMIs for a car, for a house, even for consumption goods, white goods also. So, borrowing on the retail side is continuing to improve and grow, from the banker’s point of view,” he explained.
Chatterjee said corporate appetite has also been good over the past three to four quarters.
“Investments have been good. That is the reason why the GDP growth forecast has improved. This quarter we had a 7.8 percent GDP growth, and the IMF has revised it from 6.4 to 7 percent. So this is a good sign; our country leads the pack of developing economies as far as GDP growth is concerned,” he added.
