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7 April 2023: NPCI’s new circular on levies


  • The National Payments Corporation of India (NPCI), which governs UPI, indicated that they can now levy charges on merchant transactions made through prepaid instrument wallets using UPI.
  • The new interchange charges are only applicable to prepaid payment instruments and merchant transactions. The interchange fee is generally associated with card payments to cover The transaction cost has now brought PPE wallets under its fold.
  • Prepaid payment instruments or payment methods that can be used to purchase goods and services and send or receive money by using the stored value in the wallet
  • Users have to pre-load the wallet with the desired amount. The amount can be loaded or reloaded against cash, through debit to a bank account, or by using credit or debit cards, UPI, or any other approved payment method in India.

What is PPI interoperability?

  • Previously, to use PPI at any merchant, it was necessary that the concerned merchant be engaged directly by the specific PPI user (or specific network). All PPIs with which the merchant did not have a direct tie-up would get rejected.
  • The most prevalent form of PPI used in the country is the mobile wallet, and this restriction meant that customers of one specific mobile wallet could spend the money in the wallet only at specific merchant locations that were directly tied up with the same PPI wallet provider.
  • To overcome this limitation of PPIs, the RBI has mandated interoperability among different PPI issuers subsequently.

How does PPI interoperability through UPI work?

  • After linking one’s PPI wallet to UPI, customers can transact using scan-and-pay on all UPI, interoperable QR codes. This will enable the use of PPI wallets at all merchant locations. The user can also send or receive money from any other wallet user.
  • Similarly, a merchant with any UPI or QR code canvas app can accept payments from any PPI user on a mobile wallet. PPI on UPI will speed up the growth of merchant transactions in rural areas and further deepen digital financial inclusion by catering to use cases such as health, care, transit, education, utility bills, etc.


Do merchants have to pay for accepting wallet transactions on UPI?

  • Each merchant can now work with their preferred acquiring entity for using prepaid payment instruments such as gift cards, wallets, etc. for transactions on UPI, and an interchange fee of up to 1.1% has been levied as of April 1, 2023.
  • The charges are applicable if the transaction is more than Rs. 2000. If you are a merchant and accepting UPI payments from a customer’s bank account, then there are no charges applicable.

Are there any charges to be paid by customers holding wallets for PPI on UPI transactions?

  • Officially, there are no charges to be paid by the customer. However, merchants may pass on the additional burden to customers by way of a price increase or some other means.