NPCI interchange fee rule: Will your UPI-wallet payments not be free now?

The NPCI's decision to levy 1.1 per cent fees on the UPI-wallet payments has led to a lot of speculation on social media, people are worried this will make the transactions costlier. But is it true?

The National Payments Corporation of India recently announced that from April 1, a fee of up to 1.1 per cent will have to be paid on payments between digital wallets and Unified Payments Interface (UPI) apps. This fee will only apply to payments above Rs 2,000 made using prepaid payment instruments or PPIs, including gift cards.

The PPI issuer will have to pay 15 basis points as wallet-loading service charges to the account holder's bank.

How will payments work?

From next month, the users of UPI apps will be able to send money from their digital wallets to the merchant's bank account using a UPI QR code. Earlier, such transfers were possible only between the wallets of the same provider. For example, if you had money in your Paytm wallet, then earlier, you could transfer it to another Paytm wallet but not to a PhonePe wallet.

Now, these transactions have become "interoperable". But such transactions will attract an interchange fee of 1.1 per cent if the transaction amount is Rs 2000 or more. This fee will be paid by the payment operator to the NPCI.

This fee differs between sectors. It is 0.7 per cent for telecom, education, and utilities/post office sectors. For supermarkets, the fee is 0.9 per cent.

A fee of 1 per cent will be levied for transactions related to insurance, government, mutual funds, and railways. The fees for fuel and agriculture-related transactions are 0.5 per cent and 0.7 per cent, respectively.

What about UPI to UPI payments?

Payments from one UPI id to another UPI id will continue to be free like earlier. This money will be debited directly from your bank account and credited to the receiver's bank account, like earlier, without any fee.

Will you be required to pay an additional fee for wallet payments?

No, you will not have to pay an additional fee. Just after the NPCI's circular was released, it issued a statement that the interoperable charges would only apply to merchant transactions. The payment will have to be done only by the payment operators.

NPCI added that bank account-to-account payments make up around 99.9 per cent of total UPI transactions, and these will remain free for customers and merchants.