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    Question

    Under Section 10A of the Payment and Settlement Systems

    Act, 2007, Bank Z imposes the following charges on customers: (i) ₹10 per NEFT transaction; (ii) ₹15 per RTGS transaction; (iii) ₹5 per mobile app-based fund transfer; (iv) ₹20 administrative fee on "Electronic Fund Transfer (EFT) Instructions." Bank Z claims these are administratively justified. Which of the following correctly applies Section 10A?
    A Bank Z can impose all these charges because they represent legitimate operational costs; Section 10A does not prohibit charges entirely Correct Answer Incorrect Answer
    B All charges by Bank Z violate Section 10A because no person shall impose charge for using electronic modes of payment; the phrase "electronic modes" covers NEFT, RTGS, and digital fund transfers Correct Answer Incorrect Answer
    C Only charges (i), (ii), and (iii) violate Section 10A; charge (iv) is permissible as an "administrative fee" distinct from payment mode charges Correct Answer Incorrect Answer
    D Section 10A applies only to consumer transactions, not commercial transactions; Bank Z can charge commercial entities for electronic payment modes Correct Answer Incorrect Answer
    E Bank Z can impose charges if approved by customers through advance consent in account-opening agreements Correct Answer Incorrect Answer

    Solution

    Explanation: Section 10A of the PSSA, 2007 states: "No bank or payment system provider shall impose any charge on a customer for using any electronic mode of payment for making payments or for receiving payments." The provision is categorical and unqualified. "Electronic mode of payment" encompasses NEFT, RTGS, mobile transfers, UPI, and all system-facilitated digital transfers. The statute does NOT distinguish between consumer/commercial transactions or between transaction types. The RBI has consistently interpreted Section 10A to mean that charges on electronic transactions are prohibited per se. Bank Z's charges (i) NEFT, (ii) RTGS, and (iii) mobile transfers directly violate this provision. Charge (iv), labeled "administrative fee," also violates Section 10A if it is contingent on using electronic modes. The Supreme Court has upheld this interpretation, holding that banks must absorb electronic transaction processing costs and cannot pass them to customers. Section 26(6) provides penalties for contravention: fine up to ₹10 lakhs, and if continuing, ₹25,000 per day. Thus, option (B) correctly applies Section 10A's absolute prohibition.

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