Monday 15th April 2024

UPI Payment Attracts Charges From April 1: Check Details

Prepaid Payment Instruments (PPI) charges will be imposed on merchant transactions on the Unified Payments Interface (UPI) starting on April 1, according to the National Payments Corporation of India (NPCI).

In a recent circular titled Prepaid Payment Instruments (PPI) fees on merchant transactions on Unified Payments Interface (UPI), the UPI governing body stated that transactions using PPIs on UPI would be required to pay 1.1% of the transaction value for amounts over Rs 2,000. On April 1, 2023, the interchange charge will be implemented, and it will then be revisited once again by September 30, 2023.

The use of wallets or cards as prepaid payment instruments (PPIs) for transactions amount more than Rs 2,000 will incur these charges. In light of this, this interchange fee will not apply to payments made using UPI, such as Paytm, Phonepe, or Google Pay, to friends, relatives, or anybody else, or to a merchant’s bank account.

NPCI stated in a tweet: “UPI is free, fast, secure, and seamless. Every month, over 8 billion transactions are processed free for customers and merchants using bank accounts.”

The interchange fee is charged in connection with card payments and is used to mitigate the expenses of transaction authorization, processing, and acceptance. Banks and payment service providers expect to increase their revenue by implementing interchange fees.

The interchange fee will be charged on a variety of services in the range of 0.5% to 1.1%. Fuel will be subject to an interchange fee of 0.5%; telecom, utilities/post office, education, and agriculture will have a fee of 0.7%; supermarkets will have a fee of 0.9%; and mutual funds, the government, insurance, and railroads will have a fee of 1%.

Transactions between a PPI wallet and a bank account that are peer-to-peer (P2P) or peer-to-peer-merchant (P2PM) would not be subject to the interchange charge. A wallet-loading service fee of about 15 basis points will be paid by the PPI issuer to the remitter bank.

Almost 99.9% of all UPI transactions have historically been made via the method of involving a bank account in a UPI-enabled app for payment.

According to the NPCI’s circular, the proposed interchange charge is in line with the World Bank and Council on Payments and Market Infrastructures’ suggestions for an interchange charge of up to 1.15 percent for UPI transactions.

The Reserve Bank of India (RBI), the principal regulator of payment systems in India, is ultimately responsible for making the final decision. The NPCI has sent its suggestion to the RBI, and now it must wait to see if the RBI will accept it.

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RBI Allowed PPSL To Continue Its Online Payment Aggregation Amid Approval Process

One97 Communications, the parent company of PPSL, reported in a regulatory filing on March 26 that the Reserve Bank of India has allowed Paytm Payment Services Ltd (PPSL) an extended time for resubmission of its application form for a payment aggregator (PA) licence.

According to the exchange filing, the central bank has also permitted PPSL to continue operating as a payment aggregator while it awaits government permission on previous investments received from One97 Communications.

One97 Communications advised the stock exchanges that according to RBI’s letter, PPSL will have 15 days after receiving GoI (Government of India) approval to file the application seeking authorization for PPSL to function as an online PA. But if the GoI made any unfavourable decisions, they must be immediately reported to the RBI.

It also stated that PPSL could continue operation with its online payment aggregation service for existing partners during this period without adding any new merchants.

Moreover, the company claimed that any latest improvements or changes would have “no material impact” on the business and revenues of PPSL by adding the cause that the RBI notification is only applicable to “onboarding of new online merchants” and hence the company can continue to provide payment services to all the existing online merchants as usual.

One97 Communications further clarified that for offline businesses, it could continue to onboard new merchants and provide them with payment services such as all-in-one QR, soundbox, card readers, etc.

Remarkably, as per the RBI’s new set of guidelines released in March 2020, the regulator mandated that all PAs must be authorised by it. In order to do this, the regulator advised all non-bank businesses that provide PA services to submit applications for seeking authorization by June 30, 2021, under the Payment and Settlement Systems Act, 2007 (PSS Act). Later, this deadline was extended to September 30, 2021.

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India Singapore Link Digital Payment Systems For Cross-Border Remittances

India and Singapore on Tuesday launched the linkage between Unified Payment Interface (UPI) and Singapore’s PayNow to enable cost-efficient, fast, and safe transfer of cross-border remittances. PM Narendra Modi and Singapore PM Lee Hsien Loong virtually witnessed the launch of cross-border connectivity. According to official information, the link was launched during the virtual ceremony by Reserve Bank of India (RBI) governor Shaktikanta Das and Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), by symbolically transferring funds to each other from the mobile phones.

For India, the connection between UPI and PayNow is the first cross-border person-to-person (P2P) payment link and the second for Singapore.

PM Narendra Modi said that the connection between UPI and PayNow is a gift to the citizens of both countries with a cheaper and real-time facility for remittances. This facility will benefit our overseas brothers and sisters, students, professionals, and their families. With this linkage, a new chapter opens in cross-border fintech connectivity.

Now, citizens can send and receive funds between bank accounts or e-wallets in real time by using their UPI ID, mobile phone number, or virtual payment address (VPA).

The banks participating from the Indian side are ICICI Bank, Axis Bank, DBS India, Indian Bank, State Bank of India, and Indian Overseas Bank. From the Singapore side, the participants are Liquid Group and DBS.

Through the new link, Indians can transfer upto a maximum of  Rs. 60,000 a day, and Singapore’s DBS allows its selected customers to transfer up to 200 per transaction. By the 31st of March, DBS allows all its customers to transfer upto SGD1000.

Deputy Governor of RBI, T Rabi Shankar, said that linking the payment networks across borders was a part of the G20 agenda to minimize the costs of cross-border remittances. He also added that currently, transfers happen through banks but attract a certain cost and time as India is a country with capital controls.

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