Merchant transactions on UPI above Rs 2,000 will be subject to a fee of 1.1%,  Starting from April 1

A circular from the National Payments Corporation of India has suggested the application of charges for Prepaid Payment Instruments in UPI payments.

In a recent circular, the National Payments Corporation of India (NPCI) has recommended the application of Prepaid Payment Instruments (PPI) fees for merchant transactions on Unified Payments Interface (UPI) from April 1. According to the circular, transactions made through PPIs on UPI for amounts exceeding Rs 2,000 will incur an interchange fee of 1.1% of the transaction value. The interchange fee is usually associated with card payments and covers the costs of processing, accepting, and authorizing transactions.

Transactions between a bank account and a PPI wallet for peer-to-peer (P2P) and peer-to-peer-merchant (P2PM) do not require an interchange fee. However, the PPI issuer will pay the remitter bank a wallet-loading service charge of approximately 15 basis points.

The circular outlines the introduction of interchange fees ranging from 0.5% to 1.1%, with different percentages assigned to different sectors such as fuel, telecom, utilities/post office, education, agriculture, supermarket, mutual fund, government, insurance, and railways.

The pricing will become effective from April 1, 2023, and the NPCI will review the stated pricing on or before September 30, 2023, according to the circular.