Understanding the New Interchange Fee for Merchant UPI Transactions in India
Updated: Mar 31
Summary:
The National Payments Corporation of India (NPCI) has announced that an interchange fee of up to 1.1% will be applicable on merchant UPI transactions from April 1. Prepaid Payment Instruments (PPIs) used for transactions through UPI will attract an interchange fee, but only if the transaction is more than ₹2,000. The interchange fee varies for different categories of merchants, ranging from 0.5% to 1.1%. However, normal UPI payments and P2P/P2PM transactions will not be charged. The interchange fee is aimed at increasing revenue for banks and payment service providers, and the NPCI will review the pricing in the future.
Good day everyone,
Today, I want to discuss the recent announcement made by the National Payments Corporation of India (NPCI) regarding the interchange fees applicable on merchant UPI transactions from April 1. Here are the 10 key points to take note of:
Starting from April 1, an interchange fee of up to 1.1% will be applicable on merchant UPI transactions.
Prepaid Payment Instruments (PPIs) used for transactions through UPI will attract an interchange fee, but only if the transaction is more than ₹2,000.
The interchange fee varies for different categories of merchants, ranging from 0.5% to 1.1%.
No charges will be levied on normal UPI payments, which are bank account-to-bank account based UPI payments.
For telecom, education, and utilities/post office, the interchange fee is 0.7%, while for supermarkets, the fee is 0.9% of the transaction value.
Interchange fees of 1% will be levied for insurance, government, mutual funds, and railways, while 0.5% will be charged for fuel, and 0.7% for agriculture.
Interchange fees will not be applied in the case of peer-to-peer (P2P) and peer-to-peer-merchant (P2PM) transactions. Which means general public like you and me will not be charged any fee for our normal UPI accounts.
PPI issuers will be required to pay 15 basis points (bps) to the remitter bank as a wallet-loading charge for transactions of over ₹2,000.
The NPCI will review the pricing on or before September 30, 2023.
The interchange fee is aimed at increasing revenue for banks and payment service providers.
In summary, the interchange fee is applicable on merchant UPI transactions using PPIs for transactions over ₹2,000, and varies for different categories of merchants. However, normal UPI payments and P2P/P2PM transactions will not be charged. NPCI will review the pricing in the future.
Thank you for listening.