As of April 1, the National Payments Corporation of India (NPCI) will charge an interchange fee of up to 1.1% on UPI Payment using prepaid payment instruments (PPI).
There is confusion among users as to who will be charged for these transactions and which payment methods will be charged.
To help you understand what will happen from April 1 and how it will affect you, we try to cut through the jargon.
NPCI circular: what does it say?
The NPCI circular, first reported by CNBC-TV18, imposes an interchange fee of up to 1.1% on UPI transactions via prepaid payment instruments.
On transactions over ₹2,000, this fee will also apply when loading money into wallets via UPI.
Does this affect UPI payments to friends, family, or anyone else?
This interchange fee will not apply to UPI payments made to friends, family, or merchants’ bank accounts.
As a result, peer-to-peer (P2P) and peer-to-peer-merchant (P2PM) transactions remain unaffected.
By using UPI, you can send money from your bank account to another person’s or merchant’s account for free.
Prepaid payment instruments: what are they?
Prepaid payment instruments (PPIs) include wallets and preloaded gift cards.
Paytm Wallet, PhonePe Wallet, Amazon Pay, Freecharge Wallet, etc. are examples of wallets.
How does a PPI payment via UPI work?
Through a UPI QR code, a PPI payment can be made through a wallet, like Paytm Wallet.
You will have to pay an interchange fee of up to 1.1% on transactions above ₹2,000 using your Paytm wallet and the merchant’s UPI QR code.
How much is the interchange fee?-UPI payment fee
A merchant is charged an exchange fee by the receiver bank/payment service provider.
How will these UPI Payment fee to be paid?
If you make a PPI payment via UPI at a store, and the QR code is that of PhonePe, then PhonePe will receive the interchange fee.
Merchant discount rates (MDRs) are how merchants are charged for credit card payments.
These transactions will not be charged to users.
Until wallet providers like Paytm and PhonePe, among others, decide to pass on the charges to users, you won’t have to pay a fee when loading money into wallets via UPI.
What transactions will be affected by this change?
| Merchant category | Interchange fee | Max. charges |
| Convenience stores | 1.1% | NA |
| Statutory payments | 1.0% | ₹10 |
| Mutual fund | 1.0% | ₹15 |
| Insurance | 1.0% | ₹10 |
| Railways | 1.0% | ₹5 |
| Supermarket | 0.9% | NA |
| Telecom | 0.7% | NA |
| Utilities | 0.7% | NA |
| Education | 0.7% | ₹15 |
| Agriculture | 0.7% | ₹10 |
| Real estate | 0.7% | NA |
| Fuel | 0.5% | NA |
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