India seeks banks’ views on fees for UPI payments
Mumbai: India's payments regulator is currently engaging with financial institutions and payment companies to deliberate on the potential imposition of charges on large UPI (Unified Payments Interface) transactions, according to three sources familiar with the plans.
The regulatory change occurred following the recent adaptation of India's payments legislation, which now allows for the levying of fees on transactions exceeding 2,000 rupees (approximately $20). This shift from previously free payments will benefit banks and payment firms in the third-largest economy in Asia, which handled 24 billion UPI payments amounting to $311 billion in August.
The meeting scheduled for Tuesday will address the overall costs to be levied on payments made to merchants and the distribution of these charges among banks, payment apps, and aggregators. Regulatory bodies, including the National Payments Corporation of India and the Reserve Bank of India, are considering a 0.4% fee, though the exact rate and allocation remain undecided.
Banks are expected to receive 40% of the fees, with the remaining split evenly between the payment app and the merchant's payment services provider. It should be noted that while person-to-merchant transactions are likely to be charged, peer-to-peer transactions will continue to be free.
The sources, who requested anonymity due to their lack of authorization to speak to the media, indicated that the implementation of charges on UPI would provide additional revenue streams for companies like Paytm and Pine Labs, as well as bolster the prospects for IPO-bound PhonePe and Razorpay.
Analysts at Jefferies estimate that these fees could generate an annual revenue of 50 billion to 100 billion rupees for the payments industry. India's payments ecosystem is primarily driven by apps that have attracted substantial overseas investment, including Walmart-backed PhonePe, Alphabet's Google Pay, Paytm, and Meta-backed CRED, with one U.S. dollar equating to 95.8675 Indian rupees.
Written by urgent.news from The Economic Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
