Do customers have to pay transaction fees for UPI payments?

In August of last year, the Finance Ministry announced that UPI is a digital public benefit and that no fees will be levied on transactions done through it.

The National Payments Corporation of India (NPCI) has announced that beginning April 1, an interchange charge of up to 1.1% would be levied on merchant UPI (Unified Payments Interface) transactions.

According to a recent circular from the NPCI, utilising Prepaid Payment Instruments (PPIs) for UPI transactions would incur an interchange fee. If the transaction exceeds 2,000, fees will be applied.

The interchange charge varies depending on the kind of retailer. It ranges from 0.5% to 1.1%, with a limit in place in specific areas.

MS Education Academy

According to a statement released today by NPCI, the new charge is exclusively applicable to merchant transactions done using prepaid payment instruments. The payments authority stressed that there will be no costs charged on conventional UPI transfers, dubbed “bank account-to-bank account based UPI payments.”

The interchange charge for telecom, education, and utilities/post office is 0.7%, while the fee for supermarkets is 0.9% of the transaction amount. Insurance, government, mutual funds, and railways will be charged 1%, fuel 0.5%, and agricultural 0.7.

The charges will be applicable from April 1.

In the event of peer-to-peer (P2P) and peer-to-peer-merchant (P2PM) transactions, exchange will not be used. PPP issuers will be asked to pay a wallet-loading charge of 15 basis points (bps) to the remitter bank for transactions above 2,000.

The NPCI will evaluate the price on or before September 30, 2023.

In August of last year, the Finance Ministry announced that UPI is a digital public benefit and that no fees will be levied on transactions done through it.

“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 ministry tweeted.

The announcement came after the RBI released a discussion paper in which it stated that UPI, as a fund transfer system, is similar to IMPS (Immediate Payment Service), and so costs in UPI might be equivalent to those paid on IMPS fund transfers.

Back to top button