UPI Transactions Above Rs 2,000 To Incur Charges From April 1

The National Payments Corporation of India (NPCI) in a recent notification recommended an interchange fee on Unified Payments Interface (UPI) transactions, to come into effect from April 1 onwards.

The governing body of UPI transactions, NPCI mentioned in the circular that using prepaid payment instruments (PPI) on UPI transactions will result in interchange of 1.1 per cent of the transaction value for amounts in excess of Rs 2,000.

The costs of accepting, processing and authorizing transactions will be covered by this interchange fee. This fee is typically incurred on payments made with credit or debit cards.

The PPI issuer will have to pay the remitter bank around 15 basis points as service charges for wallet loading for peer-to-peer (P2P) and peer-to-merchant (P2M) transactions between a bank account and a PPI wallet.

Moreover, the notification mentioned that fuel accounts for 0.5 per cent of interchange which is followed by telecom, utilities/post offices, education and agriculture at 0.7 per cent, 0.9 per cent for supermarkets and 1 per cent for mutual funds, the government, insurances and railways.

In addition, the circular further mentioned NPCI will be reviewing the state pricing by September 30, 2023 and the valuing will become effective starting April 1, 2023.

However, end-customers will not have to bear the brunt of this interchange fee, as per the NPCI's circular. UPI transactions for will remain free for end-customers.

The NPCI circular mentioned that P2P and P2M transactions between a bank account and PPI will not require any interchange fee.

“Interchange at the rate of 1.1 per cent of the transaction value/amount shall apply to payments made to all online merchants, large merchants and small merchants,” the NPCI said.

“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,” NPCI said today in a bid to bring more clarity on the interchange fee.

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