Starting from April 1, the National Payments Corporation of India (NPCI) will impose an interchange fee of up to 1.1% on merchant Unified Payments Interface (UPI) transactions, but customers won’t be responsible for paying it. According to a recent circular, using Prepaid Payment Instruments (PPIs) for UPI transactions will result in an interchange fee, which will only be charged if the transaction exceeds Rs.2,000. The interchange fee varies by merchant category, ranging from 0.5% to 1.1%, with a cap in some categories. NPCI clarified that this fee only applies to merchant transactions made through PPIs and that no charges will be levied on regular UPI payments, which it refers to as “bank account-to-bank account based UPI payments.”
The interchange fee for telecom, education, utilities, and post office transactions is set at 0.7%, while supermarkets will be charged 0.9% of the transaction amount. On the other hand, transactions in insurance, government, mutual funds, and railways categories will attract a charge of 1%, while fuel transactions will incur a fee of 0.5%. Transactions in agriculture will attract an interchange fee of 0.7%.
Interchange fees will not be applicable for peer-to-peer (P2P) and peer-to-peer-merchant (P2PM) transactions, while Prepaid Payment Instrument (PPI) issuers will be required to pay a wallet-loading charge of 15 basis points (bps) to the remitter bank for transactions over Rs.2,000. The National Payments Corporation of India (NPCI) will review the pricing on or before September 30, 2023.
Last year in August, the Finance Ministry declared that UPI is a digital public good and that it had no plans to impose any fees on UPI transactions. The ministry tweeted, “UPI is a digital public good with immense convenience for the public & productivity gains for the economy. There is no consideration in Govt to levy any charges for UPI services. The concerns of the service providers for cost recovery have to be met through other means.” The statement was made in response to an RBI discussion paper that suggested that UPI fees could be similar to those charged for IMPS fund transfers, given that UPI functions as a fund transfer system.
