Understanding the New UPI Rules: What is PPI and How Will it Impact Users?
If you are an avid user of UPI payments in India, you might have heard about the new rules that came into effect on April 1, 2023. The National Payment Corporation of India (NPCI) has introduced an interchange fee on merchant UPI transactions made through prepaid payment instruments (PPI). In this blog post, we’ll discuss what PPI is and how this new rule will impact UPI users in India.
What is PPI?
PPI or Prepaid Payment Instrument is a digital payment instrument that allows users to purchase goods and services, transfer funds, and withdraw cash. Examples of PPIs include digital wallets, prepaid cards, and mobile wallets. They are a popular payment option in India and have become increasingly popular due to their convenience and ease of use.
How Will the New Rule Impact Users?
As per the new rules introduced by the NPCI, an interchange fee of up to 1.1% will be applicable on merchant UPI transactions made through prepaid payment instruments. This means that UPI transactions made via PPIs such as wallets and credit cards will have an interchange fee of 1.1% if the transaction amount exceeds Rs 2,000.
However, it is essential to note that there will be no charges for bank account-to-bank account-based UPI payments i.e. regular UPI payments. So, if you are making UPI transactions directly from your bank account, you will not have to pay any additional charges.
Different Interchange Fees for Different Categories
It is also worth noting that the interchange fee will vary for different categories of merchants. For example, the fee for telecom, education, and utilities/post office will be 0.7%, while the fee for supermarkets will be 0.9% of the transaction value. On the other hand, 1% charges will be imposed for insurance, government, mutual funds, and railways, 0.5% for fuel, and 0.7% for agriculture.
Impact on PPI Providers
The new rule will also impact PPI providers, as they will have to pay 15 basis points (bps) to the remitter bank as a wallet-loading charge for transactions of over Rs 2,000. This means that the PPI providers will have to pay a fee to the bank from which the money is being transferred to the PPI.
Conclusion
In conclusion, the new rule introduced by the NPCI will impact UPI users in India who make transactions through PPIs. If you are someone who frequently uses digital wallets or prepaid cards to make UPI transactions, you will now have to pay an additional fee if the transaction amount exceeds Rs 2,000. However, if you make UPI transactions directly from your bank account, you will not be impacted by the new rule.
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