UPI to charge on transactions

Unified Payments Interface (UPI) is real-time payment system developed by the National Payments Corporation of India (NPCI). It facilitates inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions. UPI is regulated by RBI.

There are 3 ways in which we can initiate UPI payments today.

First Method: In this method, we can link the bank account to a UPI app and scan a QR code. In order to make the payment we have to enter the pin and the money gets debited from the bank account. These transactions are free of cost. The person who receives the money or the person who makes the payment does not have to pay any charges. And the fact that it’s ‘free’ really gave a fillip to UPI payments.

Second Method: You load up a prepaid wallet likewise in Paytm or Amazon. And by scanning the QR code we can make payments. On 29^th march 2023, NCPI released a new rule, saying that if you make any payment of more than ₹2,000 in a store, there’s going to be a 1.1% charge attached to this transaction. It’s a charge that the storeowner will have to bear.

Third Method: In the case of Rupay Credit card from a banks, we can link that to the UPI and pay on credit. When you swipe a card at a shop, the merchant has to pay a fee to the bank. But since Rupay is a ‘Made in India’ product that competes against Visa and Mastercard, it got some leeway. Even in this case if the transaction value is less than ₹2,000, there wouldn’t be any extra fees charged.

Each day 36 crore transactions take place in UPI. It’s getting bigger each day. In February 2021, UPI had just had a share of 11% in all kinds of retail payments. By February 2023 it raised to 22%.

NPCI also want to introduce a direct credit line on UPI means a direct loan from a bank that can be used for payments using this app.

It will be possible to take a short-term loan to make a UPI payment. Banks don’t have to get bothered about the costs and hassles of issuing physical credit cards. But the is a pre-sanctioned loan limit. There will be some sort of data analytical test to know the creditworthiness of the person. And based on it they will be allowed to draw credit when they make a purchase. Transactions can be made through a swipe or through scanning a QR code

Now, banks can easily get into this network and open the way for small credit lines. The credit amount will be an amount around Rs,10,000 and Rs.20,000. It could spur consumption. Help people recover from financial issues. Come in handy for any emergency situations. And basically, improve the quality of life of the users.

But there is a dark side to this kind of credit too.

Because UPI is so ubiquitous, people can quickly fall into the trap of borrowing. They could get tempted by easy access to credit. And when the limit runs out, they get into a crisis and could soon end up going to money lenders who don’t care about their financial position. It can end up being a vicious trap and creates a terrifying situation.