Demystifying UPI Transaction Charges: What You Need to Know

Posted on Friday, May 24th, 2024 | By IndusInd Bank

In the era of digital payments, the Unified Payment Interface (UPI) has proven to be a game-changer, revamping the way Indians transact. UPI has gained huge acceptance because of its accessibility and convenience, facilitating real-time fund transfers through mobile phones with no additional charges. However, a recent notification from the National Payment Corporation of India (NPCI) has sparked curiosity regarding transaction charges. Read on to find more information on UPI charges and their implications. 

How UPI Operates 

Regulated by the Reserve Bank of India (RBI), UPI provides a safe and seamless platform for monetary transfers. It eliminates the requirement for cash or traditional banking instruments like cheques or cards. With UPI, your bank visits significantly reduce once you have finished the bank account opening procedure. 

A UPI transfer can be initiated using identifiers like QR codes, account numbers, IFSC codes, Virtual Payment Address (VPA), or Aadhar numbers. Though free and easy to use, this method of fund transfers should be used with caution. Users are advised to exercise vigilance and verify the transaction details since UPI transfers cannot be stopped or cancelled once processed. 

Also Read: IndusPay UPI App, an Easy Way to Send and Receive Money 

UPI Transaction Limits 

NCPI sets the UPI transaction limit. The UPI limit per day for general transactions stands at ₹1,00,000. Higher limits are set for specific categories. Like insurance and capital markets at ₹2,00,000 and ₹5,00,000 for Initial Public Offerings (IPOs) and merchant transactions. However, banks may impose varying daily transaction limits, ranging from ₹25,000 to ₹1,00,000. Some banks may have a weekly or monthly UPI maximum limit. 

Are UPI Transactions Chargeable? 

No. There are no UPI transaction charges for consumers, which is the primary reason for such widespread adoption. No additional charges are incurred on peer-to-peer (P2P) or peer-to-merchant (P2M) transactions. However, the new UPI guidelines introduce an interchange fee of 1.1% on fund transfers above ₹2,000 from April 1, 2023. Such a fee is imposed on transactions conducted through prepaid payment instruments (PPI). 

Understanding PPIs 

Prepaid payment instruments leverage funds loaded in the instrument and serve as a channel for monetary transactions. Prepaid wallets are an example that enables users to transfer funds seamlessly. Such prepaid wallets provide you with a transaction history to view all the transactions made through the app. 

What is the Interchange Fee? 

The interchange fee is a transaction charge imposed on the merchants by the payment service providers. When a customer uses prepaid wallets to pay merchants from their savings account, merchants have to pay 1.1% UPI payment charges to the service provider, which is the interchange fee. 

Interchange Fee for the Customers 

The customers are not required to pay such UPI charges, regardless of the payment instrument used. This ensures that the customers are exempt from bearing the burden of PPI transfers. 

Also Read: How to Make UPI Payments through Your Credit Card? 

How to Initiate UPI Transactions? 

Getting started with UPI transactions is as easy as the bank account opening process. Apps like BHIM UPI, Google Pay, PhonePe, Paytm, etc., offer seamless integration with your savings account. Initiate UPI transfers with the following steps: 

1. Android users can download the app from the Google Play Store, and iOS users can download the app from the App Store. 

2. Finish the verification process for your SIM card and device. 

3. Link your bank accounts, debit, and credit cards to add preferred payment options. 

4. Set up a unique UPI pin for the new UPI IDs. 

5. Select ‘Send Money’ or ‘Scan QR code to pay’ to initiate a UPI transfer. 

6. Verify the details of the payee. 

7. Enter the amount you want to transfer and tap on the ‘Pay’ option. 

8. Complete the transaction by entering your UPI pin. 

You will receive a notification about whether the transaction was successful, failed, or is pending approval. 

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.