The National Payments Corporation of India (NPCI) has announced that from April 1, an interchange fee of up to 1.1 percent will be levied on merchant UPI (Unified Payments Interface) transactions. NPCI stated that using prepaid payment instruments (PPIs) for UPI transactions will incur the interchange fee if the transaction exceeds Rs 2,000.

In a recent circular from the NPCI, the interchange fee varies depending on the type of merchant and will range from 0.5% to 1.1%, with a cap in place in some categories. However, a notification issued yesterday by the NPCI clarified that the new fee is only applicable to merchant transactions made using prepaid payment instruments. The normal UPI payments, dubbed "bank account-to-bank account-based UPI payments," will be free of charge.

According to sources, the interchange fee for telecommunications, education, utilities, and post offices is 0.7% of the transaction value, while it is 0.9% for supermarkets. Insurance, government, mutual funds, and railways will be charged 1%; fuel will be charged 0.5%; and agriculture will be charged 0.75%, and the fees will go into effect on April 1.

In the case of peer-to-peer (P2P) and peer-to-peer-merchant (P2PM) transactions, exchange will not be used. PPP issuers will be required to pay a wallet-loading charge of 15 basis points (bps) to the remitter bank for transactions exceeding Rs 2,000. The NPCI will review the pricing on or before September 30, 2023.