The National Payments Corporation of India (NPCI) put up a suggestion of charging an interchange fee for Prepaid Payment Instrument (PPI) UPI transactions of more than Rs 2,000.
Banks and payment service providers have been struggling with a high cost of UPI transactions and are targets of the move, leading to increased revenue.
Beginning on April 1, the fee will be charged, and interchange pricing will be evaluated by September 30, 2023.
Overview
The headline of the earlier version of the story read: Beginning on April 1, UPI transactions of more than Rs 2,000 will be subject to a 1.1% fee. It is not the case, however. The NPCI clarified that payments of Rs 2000 or more from digital wallets to UPI IDs would not be subject to the 1.1% fee.
New Guidelines
If the transaction’s value exceeds Rs 2000, UPI payments made through PPIs, such as digital wallets like PayTM, will now be subject to a 1.1% fee. This fee will not apply to wallet transactions with a value of less than Rs 2000.
The merchant will be responsible for paying the fee. This indicates that retailers may or may not charge customers an additional cost. Free UPI transactions made directly from one bank account to another remain available.
End Note
Most UPI exchanges are for more modest sums. The NPCI believes that increasing the average transaction value of UPI transactions and lowering the overall cost of payment systems in India can be achieved by providing PPI providers with incentives to promote UPI transactions for more significant amounts.
As per the NPCI, the proposed exchange charge follows the proposals of the Panel on Installments and Market Frameworks and the World Bank, which recommend a trading expense of up to 1.15 percent for UPI exchanges.
