NPCI Clears The Air, Account-To-Account UPI Transactions To Remain Free

The National Payments Corporation of India (NPCI) has clarified that the account-to-account transactions made through the Unified Payments Interface (UPI) will continue to remain free for customers and merchants.

UPI is currently the most preferred and the most used payment system in India that allows users to transfer money between bank accounts instantly using their mobile phones. 

According to a statement by NPCI, the bank account-to-account transactions, that constitute over 99.9 per cent of total UPI transactions, will continue to remain free.

NPCI's statement comes amidst confusion among customers and merchants regarding the applicability of interchange charges for UPI transactions, following the introduction of prepaid payment instruments (PPI) into the interoperable UPI ecosystem, as per recent regulatory guidelines.

"Traditionally, the most preferred method of UPI transactions is linking the Bank account in any UPI enabled app for making payments which contributes over 99.9 per cent of total UPI transactions," the NPCI said in a statement on Wednesday (29 March).

"These Bank account-to-account transactions continue to remain free for Customers and Merchants," it added.

As per recent regulatory guidelines, the Prepaid Payment Instruments (PPI Wallets) have been permitted to be part of interoperable UPI ecosystem, the NPCI said.

"In view of this, NPCI has now permitted the PPI wallets to be part of interoperable UPI ecosystem. The interchange charges introduced are only applicable for the PPI merchant transactions and there is no charge to customers, and it is further clarified that there are no charges for the bank account to bank account based UPI payments (i.e. normal UPI payments)," it added.

"With this addition to UPI, the customers will have the choice of using any bank accounts, RuPax Credit card and prepaid wallets on UPI enabled apps," the NPCI said.

NPCI's clarification came as RBI had last year published a discussion paper on charges in the payment systems.

The RBI did not propose or hint at disposing of any policy, but merely put out some questions about different payment systems for public feedback.

On UPI, the RBI had three questions. One, if the payment system costs must be subsidised, given the zero charges.

Two, how should the fee on UPI charges be determined, that is, a percentage of the transaction or a flat value? Three, who administers the charges, the free market or the RBI?

Transactions through RTGS, NEFT, IMPS, debit cards and credit cards are charged already. However, the question was about altering the zero-charge framework of the UPI ecosystem, which facilitates the real-time movement of funds.

Also Read: The Case For Not Charging UPI Transactions