One of the country's most prestigious and veteran banks, Bank of Baroda, and we will be meeting its top management.
Bank of Baroda, as you know by name, needs no introduction. This bank started in 1908, and across the country there are more than 8,700 branches and around 12,000 ATMs.
With us is a very special guest who is the bank's MD and CEO. Dr. Debadatta Chand is joining the program. Sir, you have completed a B.Tech and MBA degree. You have also taken the CAIB qualification, done a post-graduate diploma in equity research, and a PhD in management, which is why you are also a PhD doctor. You have been a certified portfolio manager, sir, and you have experience working in institutions like PNB. You have a long, deep career experience of more than 31 years. Dr. Debadatta Chand, sir. Good morning, good afternoon. A very warm welcome to you, sir. Thank you for giving us your time and joining us. There are many issues I want to talk to you about. But let's start with what is the talk of the town. A new framework on MDR is in the works, which will be implemented from October 15. Please tell us and explain how you see this reform, and what do you think will be achieved by implementing these MDR charges?
First of all, namaskar to you. Thank you very much for inviting me. Thank you, sir. Look, this revised UPI framework that is applicable from October 15 — earlier there was zero MDR, and even now the framework is zero MDR. But there are some exclusions. For example, the exclusion is that person-to-person (P2P) was exempted earlier and is still completely exempted. For person-to-merchant, transactions below 2,000 have no MDR. For transactions above 2,000, there is a proposal for an MDR. Thirdly, even for transactions above 2,000, small merchants whose monthly transaction volume is less than 1 lakh are also exempted. This revised framework has two important points. One is that in the entire UPI framework, since UPI came to India in 2017, huge technology investment has gone in. But now UPI is the next phase for India and globally, the UPI framework is an example because of its scale, size, and seamless operations. If we want to take it to the next phase, more technology investment will be needed, customer experience will improve further, and somewhere or the other some technology-related charges should come. And in this framework, if we talk about person-to-merchant and transactions above 2,000, small merchants and street vendors are also exempted. I think this is a good initiative, in which there is an important directive to take UPI to the next phase. And in that, 96% of person-to-merchant transactions are exempted. I mean, as of today, the transactions below 2,000 and above 2,000. So my thinking is that this framework is an important decision to make India's UPI framework and the system more robust and self-sustaining. And I think customer convenience will also increase. We look at two or three more aspects of the customer — not only convenience, but the security system should be very strong. Secondly, the seamless transaction should be even better. And one particular thing I will talk about regarding technology — UPI is now seeing two or three more use cases. We have seen a significant movement of cross-border UPI in India. In many countries, cross-border UPI has also been signed and transactions are happening. Secondly, to make UPI available on feature phones, banks like Bank of Baroda had taken an initiative — the Bubble Lite feature phone in which UPI was made available on feature phones. And a new innovation is happening in mobile banking, where conversational features are being put into mobile banking. I again hope that this will also come to UPI. So, looking at all these future investment needs, technology, and global practices, I think it is an important initiative. Person-to-person was zero MDR earlier and will remain zero MDR. In person-to-merchant, there is also a huge extension — 96% of transactions are not covered. So this is a good initiative. Banks and ecosystem partners for UPI will all benefit, so that they can invest further in new technology and make the customer experience even better.
You have explained very well that there will be no difference for small merchants and small customers, and 96% of transactions will still remain outside the scope of MDR. Please tell us, sir, what this means for Bank of Baroda? What kind of impact will it have on your profitability? Please explain that as well.
Look, I don't consider this as profitability. Whatever little benefit Bank of Baroda gets from this will be reinvested in technology. Because we have been investing heavily for the last 9 to 10 years. And UPI is a multiple transaction channel — like we have branch banking, mobile banking, internet banking, and card transactions. UPI is an important channel. And globally, because we operate Bank of Baroda products globally, there is a UPI system there too. Looking at that system, India's UPI ecosystem and the seamless transactions and security features are very good. So whatever MDR charges there are — because the 0.4% charges will also be shared differently — some will stay with the acquiring bank, some with the issuing bank, some with the platform player. So it will be shared. Whatever comes in, we will reinvest it so that we can provide a better experience to the customer. So the exact number is not there as of today. When it is implemented from October, we will measure a little how much positive impact it has on cost. But my point is that whatever benefit comes will be reinvested in technology and the UPI ecosystem itself. So this is beneficial for the customer.
Very good. It is a very noble thought, Dr. Chand, that you said whatever little profit is made, you will reinvest it in technology and infrastructure for the customer. This is a good thing. So these are your thoughts on MDR. Now, sir, I want to get your opinion on RBI's policy. The policy is coming on October 7. This time, the policy becomes more important considering the global environment. What should be expected? Do you think the possibility of interest rates rising is strong this time?
