Fact check: All you need to know about 1.1% levy on UPI transactions

There has been a barrage of social media posts stating that all transactions done through the Unified Payments Interface (UPI) will attract a 1.1 per cent fee.

The recent changes that have been made by the National Payments Corporation of India have outlined an interchange of up to 1.1 per cent from April 1 on transactions done above Rs 2,000 through Prepaid Payment Instrument (PPI) done through UPI. The PPIs would include mobile wallets, digital wallets or prepaid cards like Pockets.

A press release by the NCPI said that the interchange will be charged to the merchant and not to the customer.

Many took to the social media to claim that the UPI payments were free before and now they are not.

Congress Kerala said, 'digital loot kale begins. Here is the first part of the BJP government's secret business plan behind cashless economy fad. Pay 1.1 per cent extra for all UPI transactions above Rs 2,000. Wait for more. Modi will not leave you until he robs the last Rupee in your pocket.'

The NCPI however refuted all these claims about transactions above Rs 2,000 attracting a fee.

The Ministry of Finance also took to Twitter to clarify this.

"...and it is further clarified that there are no charges for the bank account to bank account based UPI payments (i.e. normal UPI payments)", the clarification read.

This would effetely mean that peer to peer transactions between two individuals will not be applicable. It would also not be applicable to peer to merchant transactions to settle every day transactions. The decision would also not apply to UPI transactions made to recharge a wallet.

The confusion was caused after the circular was issued in which it was said that UPI transactions through PPI will carry an interchange of up to 1.1 per cent from April 1 this year. This would be levied on merchants and the issuer of the PPI will also need to pay a 15 basis point of this fee to the remitter of the bank for loading a value above Rs 2,000.

The clarification can be seen here.

Moreover the Centre had in August last year said that UPI is a digital public good, while adding that there are no plans to levy any charges for UPI services.

"UPI is a digital public good with immense convenience for the public & productivity gains for the economy. There is no consideration in Govt to levy any charges for UPI services. The concerns of the service providers for cost recovery have to be met through other means. The Govt had provided financial support for #DigitalPayment ecosystem last year and has announced the same this year as well to encourage further adoption of #DigitalPayments and promotion of payment platforms that are economical and user-friendly," a tweet by the Finance Ministry read.