UPI Payments: Is UPI Chargeable from April 1st?
There is so much bustle is in the whole country as reports came up saying that the NPCI will levy a fee of up to 1.1% on prepaid payment instruments (PPIs) for transactions through UPI. According to a circular by NPCI released on March 24, 2023, the 1.1 % interchange fee of the transaction of above Rs 2,000 will be levied on payments.
What is Interchange Fee???
An interchange fee is a fee that is charged by one bank to another bank for processing a transaction.
Now, there is too much buzz among the people that whether this 1.1% is free or chargeable for the customers.
Read further to know the truth!!
NPCI Issued Clarification
After a wide spread of misinformation that UPI will be chargeable now, ON 29 March 2023 (Wednesday), NPCI issued a clarification statement, that interchange charges are not applicable to customers but for the prepaid payment instruments (PPI) transactions.
“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 (i.e. normal UPI payments),” NPCI said.
Yes!! Bank account-to-account transactions remain free for customers and merchants.
So, do not panic, if you are a customer, then you need not pay any interchange fee. This interchange fee is only paid by merchants if the transaction is made by PPI.
What are PPIs?
So, PPIs are Prepaid Payment Instruments. Wallets, smart cards, vouchers, and magnetized chips come under PPI (prepaid payment instruments). Paytm wallet, PhonePe wallet, Amazon Pay, etc. vouchers are some examples of PPI.
Why this Interchange Fee is being charged?
An interchange fee is a fee that is charged by one bank to another bank for processing a transaction. It is charged by the receiver bank/payment service provider to the merchant.
The charges are being introduced to increase revenue of banks and payment service providers, who have been struggling with the high cost of UPI transactions.
Who will have to pay and will not have to pay?
The interchange fee will be levied on specified categories of merchants including online merchants, large merchants, and small merchants for transactions of over Rs. 2,000 from April 1.
It is clarified by NPCI in its latest circular that no charges for the bank account to bank account-based UPI payments, i.e. normal UPI payments. The interchange charges introduced are only applicable for the PPI merchant transactions and there is no charge to customers.
Hope this post helps you understand the true information. For more such reliable news and updates, stay tuned with Step Up Academy.