NPCI Decide UPI Payments of More than Rs 2,000 to Be Charged at 1.10% starting April 1, Read Now

NPCI Decide UPI payments of More than Rs 2,000 to Be Charged at 1.10% starting April 1; Read Now

The National Payments Corporation of India (NPCI) has announced that UPI transactions above Rs. 2,000 will be charged at 1.10% plus GST from April 1, 2023. This is a change from the previous system where only transactions above Rs. 10,000 were charged.

NPCI said in its circular that Peer-2-Peer (P2P) and Peer-2-Merchant (P2M) transactions between a bank account and a PPI will not require an interchange fee. Read to know who pays the interchange fee recommended by NPCI.

The NPCI has stated that this move is intended to encourage more digital payments and to incentivize merchants to accept UPI payments. The NPCI has also stated that the additional charge will not be applicable to person-to-person (P2P) transactions or transactions made to government entities and educational institutions.

It is important to note that this charge will be levied on the merchant receiving the payment, not on the user making the payment. This means that users will not be charged any extra fees for making UPI payments above Rs. 2,000.

If you are a merchant who accepts UPI payments, you should take note of this change and factor it into your business calculations. For UPI users, it is important to keep in mind that this change will only affect transactions above Rs. 2,000 and that P2P transactions and transactions to government entities and educational institutions will not be affected.

• The charge of 1.10% plus GST will be levied on the total transaction amount, including the merchant discount rate (MDR) and any other charges or fees.

• The NPCI has also clarified that this charge will be capped at Rs. 50 per transaction, which means that any transaction above Rs. 4,545 will not be charged more than Rs. 50.

• This new charge is expected to impact small merchants and businesses more than large businesses, as they may have to absorb the cost or pass it on to their customers.

• The NPCI has stated that the new charge is in line with industry standards and is aimed at promoting digital payments in the country.

• The NPCI has also encouraged merchants to adopt QR code-based UPI payments, as they are cheaper and more convenient than other payment methods such as card payments.

• Users who make UPI payments should be aware that this charge will only be applicable to transactions above Rs. 2,000 and that they will not be charged any extra fees for making P2P transactions or transactions to government entities and educational institutions.

No Impact On Customers

But as per the NPCI’s circular, the interchange fee of 1.1 per cent will have no impact on the end-customer and UPI transactions will remain free for them.

NPCI said in its circular that Peer-2-Peer (P2P) and Peer-2-Merchant (P2PM) transactions between a bank account and a PPI will not require an interchange fee.

Essentially, this fee will only apply to digital wallet transactions made via merchant QR codes, which are likely to be paid by the merchant acquirer to the wallet issuer. Therefore, neither the merchant nor the customer is directly impacted by the interchange fee.

Paytm Payments Bank also issued a clarification on the circular. On Twitter, it said, “Regarding NPCI circular on interchange fees and wallet interoperability, no customer will pay any charges on making payments from #UPI either from bank account or PPI/Paytm Wallet.”

While interchange fees are paid by merchant acquirers to wallets or card issuers, it could end up impacting merchants if it is passed on to them. However, smaller merchants and shopkeepers are unlikely to be impacted as it is applicable only on payments of over Rs 2,000.

The fee will have no impact on customers who use PPIs like wallets for UPI transactions right now, but they could be impacted later if merchants decide to pass on the burden.

NPCI also said the PPI issuer shall pay 15 basis points as a wallet loading service charge to the remitter bank (account holder’s bank) for loading transaction value greater than Rs 2,000.

This means when a customer loads a digital wallet for UPI transactions, the PPI issuer will have to pay a charge to the remitter bank. While this does not have any impact on the customer at the moment, this could impact customers if wallet issuers decide to pass on this additional charge to customers.

In a fresh press release issued today, NPCI offered more clarity on the interchange fee. “Recent regulatory guidelines, the Prepaid Payment Instruments (PPI Wallets) have been permitted to be part of the interoperable UPI ecosystem. 

In view of this, NPCI has now permitted the PPI wallets to be part of the interoperable UPI ecosystem,” NPCI said.

“The interchange charges introduced are only applicable for PPI merchant transactions and there is no charge to customers, and it is further clarified that there are no charges for bank account to bank account based UPI payments (i.e. normal UPI payments),” it added.

NPCI also said that with this addition to UPI, customers will have the choice of using any bank accounts, RuPay Credit card and prepaid wallets on UPI-enabled apps.

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