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India’s UPI Transactions Above INR 2,000 to Incur Merchant interchange Fee from April 1st, 2023

By - King Stubb & Kasiva on April 6, 2023

The National Payments Corporation of India (“NPCI”) has announced that from April 1, 2023, it will levy an interchange fee on Unified Payments Interface (“UPI”) merchant transactions over INR 2,000 made via Prepaid Payment Instruments (“PPI”).


The NPCI, which is incharge of the operation of retail payments and settlement systems in India, including the UPI, has decided to levy an interchange fee on UPI merchant transactions over INR 2,000 made via PPI. A PPI includes digital wallets, gift-cash loaded cards, etc. which are used to load money from a bank account and whenever, a consumer would make UPI payments from their digital wallets, for a value greater than INR 2000, to the merchant, there will be an interchange fee involved payable by the PPI issuers/merchant.

The goal of this move is to promote digital transactions while discouraging the usage of cash, which is considered a barrier to India’s digital payment adoption targets. This decision is aimed at assisting the banks and the payment service providers to enable them to raise revenue as the general UPI payments, bank account to bank account, are still free of charge. The mandated interchange fee pricing may be as low as 0.5% and as high as 1.1%,and the same is called to be reviewed by September 30, 2023 by the NPCI. This interchange fee is payable by the issuers of PPI/merchants; however, the PPI issuers/merchants may pass on the cost to customers indirectly by raising prices or establishing service charges.


The NPCI’s decision to levy an interchange fee on UPI merchant transactions over INR 2,000 made via PPI is a move in the right direction for India’s digital payment revolution. While it may cause some inconvenience to merchants in the short run, the long-term benefits of a digital payment environment seem to be well worth it. As more and more transactions shift to digital payments, everyone must adapt to the changing payment landscape.

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