Prepaid Payment Instruments (PPI) costs will be levied to merchant transactions on the Unified Payments Interface (UPI) starting on April 1, according to the National Payments Corporation of India (NPCI).

In a recent circular titled Prepaid Payment Instruments (PPI) fees on merchant transactions on Unified Payments Interface (UPI), the UPI governing body stated that transactions utilising PPIs on UPI will be required to pay 1.1% of the transaction value for sums over Rs 2,000. On April 1, 2023, interchange pricing will be implemented, and it will then be reviewed once more by September 30, 2023.

These fees apply to any transactions made with prepaid payment instruments (PPIs), such as wallets or cards, that total more than Rs 2,000.

Thus, this interchange fee will not apply to payments made using UPI, such as Paytm, Phonepe, or Google Pay, to friends, relatives, or anybody else, or to a merchant's bank account.


The Council on Payments and Market Infrastructures and the World Bank both recommend an interchange cost of up to 1.15 percent for UPI transactions, and the NPCI stated in its circular that the proposed interchange fee is consistent with their recommendations.

NPCI in a tweet said: "UPI is free, fast, secure and seamless. Every month, over 8 billion transactions are processed free for customers and merchants using bank-accounts."

News release from NPCI: UPI is cost-free, quick, safe, and seamless.

29 March 2023 NPCI (@NPCI NPCI)

The interchange fee is imposed on card payments and is used to reduce the expenses of transaction acceptance, processing, and authorization. In order to boost revenue for banks and payment service providers, interchange fees were introduced.

On a variety of services, an interchange fee in the range of 0.5% and 1.1% will be charged. There will be an interchange fee of 0.5% for fuel, 0.7% for telecom, utilities/post office, education, and agriculture, 0.9% for supermarkets, and 1% for mutual funds, the government, insurance, and railways.

Peer-to-peer and peer-to-peer-merchant transactions between a bank account and a PPI wallet would not be subject to the interchange fee. As a wallet-loading service fee, the PPI issuer will pay the remitter bank roughly 15 basis points.

Linking a bank account in any UPI-enabled app to make payments has historically been the most popular UPI transaction method, accounting for more than 99.9% of all UPI PPI fees that will start to be imposed on merchant transactions on UPI on April 1, according to the NPCI.

The Reserve Bank of India (RBI), the principal regulator of payment systems in India, is ultimately responsible for making the final decision. The NPCI has sent its recommendation to the RBI, and now it must wait to see if the RBI will accept it.

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