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UPI payments PPI Charge: What is the PPI charge on UPI payments, whose loss and whose benefit?


UPI payments PPI Charge: Unified Payment Interface (UPI) has now become an important part of our needs. From vegetable vendors on the roadside to shining shops in malls, QR codes of UPI are seen pasted. But for some time, UPI has been in the headlines because of one charge and that is Prepaid Payment Instruments (PPI). National Payments Corporation of India (NPCI) has permitted to include of PPI in the interoperable UPI ecosystem. But the question is who will have to pay this charge? Will a common customer have to pay charges for UPI payment? There is a lot of confusion regarding this. So let us know the answers to all the important questions.

What is PPI and how much is charged?

NPCI had said in one of its circulars that PPI charges will be implemented on merchant transactions through UPI from April 1, 2023. Under this, there will be an interchange charge of 1.1 percent on transactions above Rs 2000. Now let us understand what PPI is. If we understand it in simple language, it is a kind of digital wallet, which provides the service of depositing money to the users. Payment apps like Paytm and PhonePe provide this service.

Who will pay the charge?

Suppose a customer is making a PPI payment through UPI (Paytm or Google Pay) at a store or online and the QR code belongs to PhonePe, then PhonePe will receive the applicable interchange fee from the merchant. In the case of UPI transactions, the interchange charge is paid by the bank of the merchant (the person or business receiving the payment) to the bank of the payer (the person making the payment).

Will there be no interchange fee on such transactions?

Interchange charges will not be applicable on peer-to-peer (P2P) and peer-to-peer-merchant (P2PM) transactions between the bank account and the PPI wallet. Therefore, the general customer will not have to pay any charges for transactions or bank account-to-bank account-based UPI payments.

What is the interchange fee?

Interchange fee can be defined as the fee that is charged to the merchant by the receiving bank or payment service provider. This is levied to cover the cost of accepting, processing, and authorizing the transaction. These charges have been introduced to boost the revenue of banks and payment service providers struggling with the high costs of UPI transactions.

Where and how much will the interchange charge be charged?

Charges will be applicable if users use UPI to load more than Rs 2,000 into their wallets.

According to the NPCI circular, PPI issuers will have to pay 15 basis points (BPS) as a wallet-loading service charge to the account holder's bank for transactions above Rs 2,000.

According to NPCI, issuers of prepaid instruments like Paytm or Ola Financial Services and others will have to pay 15 BPS as wallet loading charges to the remitter bank, i.e. the account holder's bank, if the amount exceeds Rs 2,000.

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Interchange charges will also be applicable on various services in the range of 0.5-1.1 percent. Interchange fee of 0.5 percent will be applicable on fuel, 0.7 percent for telecom, utility/post office, education, agriculture, 0.9 percent for supermarkets, and one per cent for mutual funds, government, insurance and railways.