UPI payments of more than Rs 2,000 to be charged at 1.1% starting …

The National Payments Corporation of India (NPCI) on Wednesday clarified about the recently introduced interchange charges, saying they are only applicable for the prepaid payment instruments (PPI) transactions and there is no charge to customers. It also clarified that there will be no charges for the bank account to bank account-based UPI payments — normal UPI payments. The UPI governing body, in a recent circular, said that for amounts over Rs 2,000, transactions using PPIs — gift cards, wallets, among others — through UPI will have to pay 1.1 per cent of the transaction value.

The interchange pricing will be introduced on April 1, 2023, and then again reviewed by September 30, 2023. “Recent regulatory guidelines, the Prepaid Payment Instruments (PPI Wallets) have been permitted to be part of interoperable UPI ecosystem. In view of this NPCI has now permitted the PPI wallets to be part of interoperable UPI ecosystem.

The interchange charges introduced are only applicable for the PPI merchant transactions and there is no charge to customers, and it is further clarified that there are no charges for the bank account to bank account based UPI payments (i.e. normal UPI payments),” NPCI said on Wednesday. NPCI in a tweet said: “UPI is free, fast, secure and seamless. Every month, over 8 billion transactions are processed free for customers and merchants using bank-accounts.”

The interchange fee can be associated with card payments and is levied to cover the costs of accepting, processing, and authorising transactions. The introduction of interchange fees is aimed at increasing revenue for banks and payment service providers. The interchange fee will be applicable in the range of 0.5-1.1 per cent on various services.

An interchange fee of 0.5 per cent will be applicable on fuel, 0.7 per cent for telecom, utilities/post office, education, agriculture, 0.9 per cent for supermarkets, 1 per cent for mutual fund, government, insurance and railways. The interchange fee would not be applicable on peer-to-peer (P2P) and peer-to-peer-merchant (P2PM) transactions between a bank account and a PPI wallet. The PPI issuer will pay the remitter bank approximately 15 basis points as a wallet-loading service charge.

Traditionally, the most preferred method of UPI transactions is linking the bank account in any UPI-enabled app for making payments, which contributes over 99.9 per cent of total UPI transactions. The NPCI, in its circular, said the proposed interchange fee is in line with the recommendations of the Committee on Payments and Market Infrastructures and the World Bank, which suggest an interchange fee of up to 1.15 per cent for UPI transactions. However, the final decision rests with the Reserve Bank of India (RBI), which is the core regulator of payment systems in India.

The NPCI has submitted its proposal to the RBI and will have to wait to see whether the RBI will approve its recommendation. WATCH: UPI Linked To Singapore’s ‘PayNow’, Now Send Money Directly To Singapore Also read: Sarvatra Technologies collaborates with ICICI bank, IDFC First Bank and Pine Labs to extend UPI for G20 travellers

(CORRECTION: The article’s earlier headline ‘UPI payments of more than Rs 2,000 to be charged at 1.1% starting April 1; check details’ has been updated to ‘ NPCI clarifies no charges on customer for normal UPI transactions’)

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