NPCI’s New Circular on Levy Charges on Prepaid Payment Instruments (PPIs)
NPCI New Rules for UPI: NPCI’s New Circular on Levy Charges means that PPI wallets are now included in the interchange fee system, which is typically associated with card payments to cover transaction costs. NPCI New Rules for UPI is important for UPSC Prelims Exam 2023 and UPSC Mains Exam (GS Paper 3- Indian Economy).
Recently, the National Payments Corporation of India (NPCI) has notified banks through a circular that they are allowed to impose fees on merchant transactions carried out via Prepaid Instrument wallets utilizing UPI.
The NPCI has released a statement further clarifying that regular UPI transactions between banks will remain free of charge, and customers will not be charged for making transactions through PPI on UPI.
Payment methods known as Prepaid Payment Instruments (PPIs) allow users to buy goods and services and conduct money transfers using stored value in a wallet.
Previously, using a Prepaid Payment Instrument (PPI) at a merchant required a direct tie-up between the specific PPI issuer’s network and the merchant. PPIs from issuers without a direct partnership with a merchant would be rejected.
Once a customer has linked their PPI wallet to UPI, they can conduct transactions using the Scan and Pay feature on all UPI interoperable QR codes. This makes it possible to use PPI wallets at any merchant location and send or receive money to and from any other wallet user.
Previously, merchants accepting PPIs such as mobile wallets or prepaid cards were required to pay charges to the PPI issuer. With the new changes, charges have been standardized at a network level, but each merchant can still work with their preferred acquiring entity.
Customers are not officially required to pay any charges. However, merchants have the option to pass on the additional burden to customers by increasing prices or using other means.
Unified Payments Interface (UPI) is a real-time payment system developed by NPCI that facilitates inter-bank transactions by instantly transferring funds between two bank accounts on a mobile platform.
Officially, customers are not required to pay any charges. However, merchants have the option to pass on the additional burden to customers by increasing prices or using other means.
The new rules aim to standardize charges and bring uniformity in the payment ecosystem, while also encouraging digital financial inclusion in the country.
From April 1, 2023, UPI merchant transactions of over ₹2,000 will attract an interchange fee of 1.1 per cent. Bank account to bank account-based UPI payments or normal UPI payments will not have any charges.
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