In a major bid to push the adoption of digital payments, particularly Unified Payment Interface (UPI), in India, the Central Board of Direct Taxes (CBDT) on Monday (31 August) asked the banks to return to the customers and merchants any fees levied for making UPI transactions in 2020, reports Economic Times.

Asserting that imposition of such charges on UPI transactions violated the law of the land, CBDT asked the banks to stop the imposition of all such charges or face "penal actions" under Section 271 DS of the IT Act, as well as Section 26 of the PSS Act.

This comes as a blow to private banks like Axis Bank, ICICI Bank, HDFC Bank and Kotak Mahindra Bank which had recently begun to charge their customers for UPI transactions beyond a prescribed limit. These banks had mandated that the customers could only make 20 free peer-to-peer UPI transactions, post which they would be charged Rs 2.5-Rs 5 per transaction depending on the ticket-size.

The CBDT's crackdown comes, as last year on 30 December, the Board had clarified that any charge, including merchant discount rate (MDR) would not be applicable on or after 1 January 2020 on the payments made through electronic modes.