Starting from April 1, 2023, the National Payments Corporation of India (NPCI) has declared that any PPI (prepaid payment instruments) transactions above Rs 2,000 made by customers at merchants will be charged a fee from 0.5 to 1.1% depending on different services. This decision is likely to affect small merchants and businesses who may face challenges in bearing the added expense. The NPCI has clarified that the payment charges will be applied to the wallet payments and not bank transfers. Customers do not have to pay any fees but merchants have to bear all the fees and they cannot ask the consumer to pay extra.
It should be noted that UPI payment charges will only apply to transactions in which a customer pays a merchant. Peer-to-peer (P2P) transactions will remain unaffected and free of charge. Small merchants with annual sales of up to Rs 40 lakh will also be exempt from the charges. Some have criticized the decision to charge UPI payment fees. Many experts have argued that charging merchants for accepting digital payments is unfair because it contradicts the government’s push for a cashless economy. They have also stated that this move may result in higher consumer prices, as merchants may choose to pass on the additional cost to customers.
The NPCI, on the other hand, has defended its decision, claiming that the fees will help ensure the long-term viability of the UPI ecosystem and enable banks to provide better services to customers. The NPCI also stated that UPI transactions have increased significantly in recent years, and the charges will assist it in generating revenue to cover operational costs. Overall, the imposition of UPI payment charges is expected to have a significant impact on Indian merchants and small businesses. While it remains to be seen how they will react to the increased costs, many are hoping that the government will step in to address their concerns and provide assistance in this difficult environment.