Government imposes surcharge for Google Pay and other payment apps

Tags: Economy/Finance National News

The National Payments Corporation of India (NPCI) has issued a circular suggesting "Prepaid Payment Instruments (PPI)" charges on merchant transactions on Unified Payments Interface (UPI).

An overview of the news

• NPCI has introduced an interchange charge of up to 1.1 per cent on merchant UPI transactions done using prepaid payment instruments from April 1.

• It will be levied on UPI payments above Rs 2,000 made to online merchants, large merchants and small merchants.

• NPCI has clarified that there will be no charges for UPI payment from bank account to bank account or normal UPI payment.

• With UPI, customers will have the option of using any bank account, RuPay credit card and prepaid wallet on a UPI-enabled app.

What is the interchange fee?

• The interchange fee is levied to cover the costs of accepting, processing, and authorising transactions. 

• This is likely to make the transaction costlier. 

• Interchange fee is a fee paid by payment service providers to wallet issuers such as banks.

• These wallets are mainly online payments like Paytm, PhonePe and Google Pay.

National Payments Corporation of India (NPCI)

• NPCI, an umbrella organization for operating retail payment and settlement systems in India, has been initiated by the 'RBI' and the 'Indian Banks' Association' (IBA) under the 'Payment and Settlement Systems Act, 2007'.

• It is a 'not-for-profit' company established under the provisions of Section 25 of the Companies Act 1956 (as amended in 2013), with the objective of providing physical and electronic payment infrastructure to the entire banking system in India.