Explained: What The 1.1% Charge On UPI Merchant Transactions Above Rs 2,000 From April 1 Means

In its recent circular, NPCI (National Payments Corporation of India), which is an umbrella organization for operating retail payments and settlement systems in India, has advised Prepaid Payment Instruments (PPI) fees to be applied to merchant transactions on Unified Payments Interface (UPI) beginning on April 1.

What UPI Charges Are Introduced?

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NPCI said in the circular that for amounts over Rs 2,000, using PPIs on UPI will result in an interchange at 1.1 per cent of the transaction value, as per various media reports.?The interchange fee is typically associated with card payments and is levied to cover the costs of accepting, processing, and authorizing transactions.

However, NPCI tweeted today to clarify that customers will not be charged anything.

No Charges For Customers

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“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.

With this addition to UPI, the customers will have the choice of using any bank accounts, RuPay Credit card and prepaid wallets on UPI enabled apps.”

NPCI To Review The Pricing By Sept 30

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Peer-to-peer (P2P) and peer-to-peer-merchant (P2PM) transactions between a bank account and a PPI wallet do not require an interchange, and the PPI issuer will pay the remitter bank approximately 15 basis points as a wallet-loading service charge.

Introduction of interchange is in the range of 0.5-1.1 per cent, with interchange being 0.5 per cent for fuel, 0.7 per cent for telecom, utilities/post office, education, agriculture, 0.9 per cent for supermarket and 1 per cent for mutual fund, government, insurance and railways, as per Business Standard report.

The pricing will come into effect starting April 1, 2023. NPCI will review the stated pricing on or before Sept. 30, 2023, the circular said.

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