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Understanding UPI Circular and Its Impact On Customers - Explainer

By FnF Correspondent | PUBLISHED: 29, Mar 2023, 18:38 pm IST | UPDATED: 29, Mar 2023, 18:39 pm IST

Understanding UPI Circular and Its Impact On Customers - Explainer

New Delhi: Unified Payment Interface (UPI) has seen a tremendous growth in the country in the past few years due to its inclusivity with third-party apps. UPI has become a popular payment medium among Indians as it remained free of most of charges that other payment medium have to pay during the transactions. UPI’s regulatory body, National Payments Corporation of India (NPCI) has done a lot of integration of its payment system with third party apps in recent years to make it more inclusive and convenient, whose results have seen with the tremendous growth of UPI payment in the country. PPI wallets have been permitted to be part of interoperable UPI ecosystems. Most of them don't have to pay any charge until now.

However, NPCI has announced users will have to pay 1.1% of the transaction value if they are doing transactions of over Rs 2000 for using Prepaid Payment Instruments (PPI) on UPI from April 1, 2023.. NPCI further clarified after it stirred panic and confusion among customers, that the interchange charges introduced are only applicable for the PPI merchant transactions and there is no charge to customers. However, customers are still worried regarding the circular like who has to pay and what are PPIs. Let’s decode the circular full of jargons one by one in an easy way.

Suppose, if you are doing a payment to a merchant via Paytm wallet. Once you scan the merchant’s QR code, it will allow you to direclty pay to the merchant’s bank account. So from April onwards, an interchange fee of up to 1.1% will be levied on transactions above Rs 2000 that the merchant has to pay, not you.

Unified Payment Interface (UPI), a real-time mobile payment system that allows bank to bank transfer, has become the backbone of digital India. From payment transfer to tens of thousands to Rs 5-10 payment to tea shops, UPI has transformed the Indian economy drastically in the past few years. One of the reasons that links to the success of UPI's fabulous growth is no charges of transactions from peer-to-peer or peer-to-merchant until now. NPCI is all set to go away with free days of UPI.

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