Attention: UPI merchant transactions over INR 2,000 to carry charge of 1.1% from April
Written by Sanjay Kumar
The National Payments Corporation of India (NPCI) has issued a circular in which it suggested “Prepaid Payment Instruments (PPI)” fees on merchant transactions on Unified Payments Interface (UPI).
The regulatory body of the UPI payment system has stated that the PPI fees will be charged on transactions over INR 2,000 on UPI and will result in an interchange of 1.1% of the transaction value.
Unified Payments Interface
- Product type – Instant real-time inter-bank payment system
- Owner – National Payments Corporation of India
- Produced by – National Payments Corporation of India
- Country – India
- Introduced – 11 April 2016; 6 years ago
- Markets – India, Bhutan, Nepal, Qatar, Saudi Arabia, Malaysia, Singapore, Mauritius, Bahrain, Maldives, United Arab Emirates, France, Oman, United Kingdom, European Union, Russia (International by cross border payment agreements)ban
Interchange fees are imposed to cover the expenses of accepting, processing, and authorizing transactions. This is expected to increase the cost of transactions. The new rule will come into effect from 1 April.
According to the circular, the issuer of prepaid instruments will also be required to pay 15 basis points of the fee to the remitter bank for loading a transaction value above INR 2,000.
It is important to note that the fee will not be applicable to person-to-person transactions or person-to-merchant transactions between a bank and the prepaid wallet.
NPCI will conduct a review of the proposed pricing on or before 30 September.
What will be the impact on you?
Now it is essential for you to raise a question in your mind as to whether this fee will have to be paid by the general user, and the answer is NO. This does not apply to peer-to-peer (P2P) and peer-to-merchant (P2M) transactions between bank accounts and PPI wallets. This means that if you make a payment to someone, a shopkeeper, etc., then you will not have to pay any fees.
It is reported that 1.1 percent is the highest fee. There are many merchants who will have to pay lesser interchange fees than this. For example, if UPI payment is made using petrol pump prepaid instrument, then the interchange fee will be 0.5 percent. Similarly, if someone makes mutual funds, insurance, utility, education payments, etc., different interchange fees will be charged.
UPI Transactions Rise Over 7.82 Billion in December 2022
Unified Payments Interface (UPI) has witnessed unprecedented growth in India since its launch in 2016. The Unified Payments Interface (UPI) closed the year 2022 on a high note as the number of transactions reached a record 7.82 billion in December and totalled INR 12.82 trillion, also a record high.
Its user-friendly interface, real-time payment capabilities, and availability across multiple platforms have contributed to its immense popularity. With the government’s push towards a digital economy and the increasing adoption of online transactions, UPI is expected to continue its upward trajectory and play a crucial role in India’s digital payments landscape.
FAQ
01. What is UPI?
Unified Payments Interface (UPI) is an instant real-time inter-bank payment system in India. It is owned and produced by the National Payments Corporation of India (NPCI) and was introduced on April 11, 2016. UPI allows users to transfer funds instantly between bank accounts through a mobile application.
02. What are the proposed fees for Prepaid Payment Instruments (PPI) on merchant transactions on UPI?
The National Payments Corporation of India (NPCI) has proposed PPI fees on transactions above ₹2,000 on UPI, which will result in an interchange of 1.1% of the transaction value. The issuer of prepaid instruments will also be required to pay 15 basis points of the fee to the remitter bank for loading a transaction value above ₹2,000.
03. When will the new UPI transaction fees come into effect?
The new UPI transaction fees will come into effect from April 1, 2023.
04. What are interchange fees?
Interchange fees are fees imposed to cover the expenses of accepting, processing, and authorizing transactions.
05. Will the proposed pricing on UPI transaction fees be reviewed?
Yes, NPCI will conduct a review of the proposed pricing on or before September 30, 2023.
06. What is the current status of UPI transactions in India?
As of December 2022, UPI transactions in India have reached a record 7.82 billion, with a total value of INR 12.82 trillion. UPI has witnessed unprecedented growth since its launch in 2016, and its popularity is expected to continue to rise with the government’s push toward a digital economy and the increasing adoption of online transactions.