NPCI to Charge 1.1% on UPI transactions above Rs2000

The NPCI, The National Payments Corporation of India recently released a notice, a circular in which it is mentioned that the 1.1% of the fee will be cut on any UPI transactions above Rs 2000 made using prepaid payment instruments (PPI) like online Paytm wallets, Phone Pe wallets, or gift cards. 

NPCI to Charge 1.1% on UPI transactions above Rs 2000
NPCI to Charge 1.1% on UPI transactions above Rs 2000

Meanwhile, in simple terms, if you are sending money to your friends, the fee does not apply to peer-to-peer P2P or Peer to Merchant (P2PM) transactions, the transactions between a bank account and a PPI will not be needing any interchange fee. 

As per the circular issued on March 24, 2023, the required changes will come into an effect from April 1, 2023, and the pricing will be again reviewed on or before September 30th, 2023. But this thing is confusing the citizens that is everyone will have to pay the charge? 

Well, No the fee is only paid by merchants if payment is made through PPI- Prepaid Payment Instruments. Wallets, smart cards, gift vouchers, and magnetized chips are some which come under payment instruments. Customers will have no impact on this 1.1% fee, it remains free for them.

Additionally, this fee will only apply to digital wallet transactions that are made through merchant QR codes, which are paid by the merchant to the wallet issuer. Therefore, both the merchant and the customer are directly impacted by the 1.1% interchange fee.

However, on this circular, the Paytm Payments Bank also issued a clarification. The company said on the microblogging site Twitter, regarding the NPCI circular on interchange fees and wallet, this is to be noted that no customer has to pay any charges on making payments from UPI to a bank account or PPI/Paytm Wallet. So, they do not need to worry about the 1.1% transaction fee. Moreover, the smaller merchants and shopkeepers are also will not be impacted much as it is applicable on payments of over Rs 2,000.

But that doesn’t mean that you are free, as the fee will have no impact on customers but they could be impacted if merchants decide to pass the fee on them. NPCI also clearly says that the PPI issuer has to pay 15 basic points as a wallet-loading service charge to the bank account holder on transactions above 2000. Therefore, if a customer is using a digital wallet for UPI transactions over 2000 then the PPI issuer will have to pay the interchange 1.1% fee to the bank account holder. 

The interchange fee is only applicable for the PPI merchant transactions and the customers will have no impact on this interchange fee, there is no charge for customers, and it is further clear that there are no charges for the payments done on bank account-to-bank account. 

NPCI also cleared that with this new thing added to UPI transactions, the customers will have the choice from now of using any RuPay Credit card, bank account, and prepaid wallet.

Additionally, an interchange fee of 0.5% will be applicable for some categories like fuel, agriculture, education, and utility payments. And the categories that come under convenience stores and specialty retail outlets will have an interchange charge of 1.1%.

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