In March this year, the National Payments Corporation of India (NPCI), which governs UPI, announced that an interchange fee of up to 1.1% will be applicable for UPI merchant transactions initiated using a Prepaid Payment Instrument (PPI). PPIs include wallets, gift cards, vouchers, etc. This interchange fee will be paid by the merchant’s UPI payments solution provider to the customer’s UPI wallet provider. For example, if a customer pays using his Paytm wallet by scanning a QR code provided by HDFC Bank, then HDFC Bank will pay the interchange fee to Paytm. However, we weren’t clear if the merchant’s UPI payments solution provider (HDFC, in the above example) could pass on the fee to the merchants. But in May, HDFC bank informed its merchants that a fee of 1.2 percent would be levied for UPI payments they receive from PPIs, confirming that the fees can be passed on to merchants. But this raised a tricky legal situation. Srikanth Lakshmanan from Cashless Collective pointed out on Twitter that the government's notification prohibiting any fees on merchants for UPI payments under the Payment and Settlement Systems (PSS) Act, 2007 would apply to all types of UPI payments even if it is from PPIs. The NPCI circular appeared to be in violation of this notification by allowing an interchange fee for UPI payments from PPIs. Article continues below ⬇, you might also want to read: HDFC To Charge Merchants 1.2% Fee For Wallet-Based UPI Payments Explained: What’s The 1.1% Interchange Fee On UPI…
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