Government May Consider 0.3% Fee To Ensure Financial Viability of UPI: Report The report also stated that the facilitation fee of 0.3% can generate around INR 5,000 crore in 2023-24

By Teena Jose

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A study by IIT Bombay has suggested that government may consider a 0.3% uniform digital payment facilitation fee to fund the infrastructure required for such transactions and also to ensure financial viability of the UPI payment system, according to a PTI report. It also stated that the facilitation fee of 0.3% can generate around INR 5,000 crore in 2023-24.

The study titled 'Charges for PPI-based UPI payments--The Deception', which analyses the impact of the decision of the National Payments Corporation of India (NPCI) to introduce interchange fee on payments through mobile wallets, reportedly argued that the payments received by merchants should remain 'unpolluted' whether they are from UPI directly or through prepaid e-wallets.

The NPCI, with effect from April 1, 2023 introduced an interchange fee of 1.1% on transaction amount for usage of prepaid payment instruments for making payments through UPI to merchants. As the reports suggest, the fee will be charged depending on the service provided. For example, 0.5% will be charged on fuel-related payments, 0.7% for telecom, utilities/post-office, education and agriculture transactions and 1% for court costs, tax payments and insurance sales. The interchange fee of 1.1% will have no impact on the end-customer and UPI transactions will remain free for them. Also, the Peer-2-Peer (P2P) and Peer-2-Merchant (P2PM) transactions between a bank account and a PPI will not require an interchange fee.

The report further noted that rather than thrusting the operational expenses onto the merchants and creating a disparity, it should be borne by the prepaid wallet user, thereby never introducing a situation similar to passive smoking. This will keep all UPI-based payments received by merchants unpolluted and unburdened by the merchant discount rate (MDR).

Teena Jose

News Desk Reporter with Entrepreneur India

Teena is a post graduate in financial journalism. She has an avid interest in content creation, digital media and fashion.

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