No charge on normal UPI transactions, clarifies NPCI

• The National Payments Corporation of India (NPCI) clarified that bank to bank account transfer via UPI will continue to remain free, but any merchant payment that goes through two different wallets will be chargeable above Rs 2,000.

• The interoperable charge of 1.1 per cent for each transaction above Rs 2,000 will be payable by merchant from April 1.

• Interchange charges are only applicable for the Prepaid Payment Instruments (PPI) merchant transactions and there is no charge to customers, NPCI clarified.

• There are no charges for the bank account to bank account-based UPI payments (normal UPI payments).

• Traditionally, the most preferred method of UPI transactions is linking the bank account in any UPI-enabled app for making payments.

What is Prepaid Payment Instrument?

Prepaid Payment Instruments (PPIs) are instruments that facilitate purchase of goods and services, financial services, remittance facilities, etc, against the value stored therein. The value stored on such instruments represents the value paid for by the holder, by cash, by debit to a bank account, or by credit card. The PPIs can be issued as smart cards, magnetic stripe cards, internet accounts, internet wallets, mobile accounts, mobile wallets, paper vouchers and any such instruments which can be used to access the prepaid amount.

What is Unified Payments Interface (UPI)?

• Before 2016, India used a number of different systems to transfer money between banks. The traditional forms included National Electronic Funds Transfer (NEFT) and Real-Time Gross Settlement (RTGS). With the plethora of systems, rules and growing paper burden, there was a need for a unified system that could automate and standardise India’s payment platforms.

• In 2016, the National Payments Corporation of India (NPCI) set out with a mandate to change the face of India’s payment systems. It developed the Unified Payments Interface (UPI) as an architecture framework with a set of standard Application Programming Interface (API) specifications to facilitate online payments. 

• The aim was to simplify and provide a single interface across all NPCI systems, thereby creating interoperability and a superior customer experience.

• The pilot programme, with 21 member banks, was launched on April 11, 2016.

• The UPI is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing and merchant payments into one hood. 

• It also caters to the “peer to peer” collect request which can be scheduled and paid as per requirement and convenience. 

• It facilitates immediate money transfer through mobile devices round the clock.

Rising popularity of UPI

• The journey of UPI has been fascinating. The number of banks that became part of the real-time payment system increased from 35 in December 2017 to more than 380 in December 2022. 

• The UPI has emerged as the preferred mode of digital payment by offering free, fast, secure and seamless experience.

• The volume of UPI transactions has increased manifold from 0.45 crore in January 2017 to 804 crore in January 2023. The value of UPI transactions has increased from just Rs 1,700 crore to Rs 12.98 lakh crore during the same period.

National Payments Corporation of India

• National Payments Corporation of India (NPCI), an umbrella organisation for operating retail payments and settlement systems in India, is an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, for creating a robust Payment & Settlement Infrastructure in India. It was founded in 2008. 

• Considering the utility nature of the objects of NPCI, it has been incorporated as a “Not for Profit” company, with an intention to provide infrastructure to the entire banking system in India for physical as well as electronic payment and settlement systems. 

• The company is focused on bringing innovations in the retail payment systems through the use of technology for achieving greater efficiency in operations and widening the reach of payment systems.

• NPCI, during its journey, has made a significant impact on the retail payment systems in the country. 

Some major innovations by NPCI

RuPay: It is an indigenously developed payment system designed to meet the expectation and needs of the Indian consumer, banks and merchant ecosystem. RuPay supports the issuance of debit, credit and prepaid cards by banks in India and thereby supporting the growth of retail electronic payments in India.

Immediate Payment Service (IMPS): For transferring funds real time and 24x7 interbank was a major challenge faced in the banking industry. Only NEFT & RTGS were available to users for fund transfer during banking hours. IMPS provides robust and real time fund transfer which offers an instant, 24x7, interbank electronic fund transfer service that could be accessed on multiple channels. 

National Automated Clearing House (NACH): NPCI has implemented NACH for banks, financial institutions, corporates and government a web based solution to facilitate interbank, high volume, electronic transactions which are repetitive and periodic in nature. NACH system can be used for making bulk transactions towards distribution of subsidies, dividends, interest, salary, pension, etc and also for bulk transactions towards collection of payments pertaining to telephone, electricity, water, loans, investments in mutual funds, insurance premium etc.

Unified Payments Interface (UPI): It is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing and merchant payments into one hood. It also caters to the “peer to peer” collect request which can be scheduled and paid as per requirement and convenience. It facilitates immediate money transfer through mobile devices round the clock.

Bharat Interface for Money (BHIM) UPI: It is a payment app that lets users make simple, easy and quick transactions using Unified Payments Interface (UPI). Users can make direct bank payments to anyone on UPI using their UPI ID or scanning their QR with the BHIM app. Users can also request money through the app from a UPI ID.

BHIM Aadhaar Pay: It is meant for merchants to receive digital payments from customers over the counter through Aadhaar authentication. It allows for any merchant associated with any acquiring bank on BHIM Aadhaar Pay service, to allow the merchant to accept payment from a customer of any bank, by authenticating the customer’s biometrics – currently only fingerprints, directly from the customer’s Aadhaar enabled bank account and receive the sale proceeds instantaneously directly into merchant’s own bank account.

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