NPCI clarifies: UPI transactions to remain free; 1.1% fee only for merchants who accept payments over Rs 2000

By Team Newsable | First Published Mar 29, 2023, 1:16 PM IST

According to the National Payments Corporation of India, the interchange charges introduced are not charged to the customer but are only applicable for the PPI merchant transactions.

India's digital payments revolution has seen over eight billion transactions being processed every month free for customers and merchants using bank accounts. Now, doubts have arisen about the National Payments Corporation of India's recommendation on levying interchange fees on UPI for transactions over Rs 2000 made through Prepaid Payment Instruments (PPIs).

However, dispelling the doubts, the NPCI has clarified that users will not be charged for UPI transactions from April 1. The new 1.1 per cent fee on UPI transactions will only apply to merchants who accept payments over Rs 2,000 using PPIs like mobile wallets. Individual users making personal transactions using UPI will not be charged anything additional.

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Instituted in the year 2008, the National Payments Corporation of India has been operating retail payments and settlement systems in India. The NPCI is mandated to bring innovations in retail payments systems through use of technology and transform India into a digital economy. According to the NPCI, payments made through the Unified Payments Interface or UPI have emerged as the preferred mode of digital payments, offering a free, fast, secure and seamless experience.

In a statement, the NCPIL underlined that over 99.9 per cent of the total UPI transactions were traditionally done using the most preferred method of UPI transactions -- linking the bank account in any UPI-enabled app for making payments. To date, these bank account-to-account transactions remain free for both merchants and customers.

Prepaid Payment Instruments (PPI Wallets) have been permitted to be part of an interoperable UPI ecosystem as per recent regulatory guidelines. Following this, the NPCI has now allowed the PPI wallets to be part of the interoperable UPI ecosystem. The interchange charges introduced are not charged to the customer but are only applicable for the PPI merchant transactions.

The NPCIL further clarified that there are no charges on UPI payments based on bank account-to-bank account. With these additions to UPI, customers can use any bank account, prepaid wallets and RuPay credit card on UPI-enabled apps.

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