We all love and use UPI. We love how we can easily send and receive money from a friend or a family member and how we don’t even have to wait for a while for the money to reflect in our account. With so many UPI providers out there, with more and more cash backs and scratch cards and discounts, we’ve seen the rise of UPI like no other mode of payments. It’s so widely used that it is the most preferred payment mode for a greater extent of P2P (Person to Person) transactions.

Let’s dig a little deeper.

What is UPI?

Not that anyone needs an introduction, but here’s one anyway. Unified Payments Interface (UPI) is an instant, real-time payments system developed by the National Payments Corporation of India (NPCI) to facilitate inter-bank transactions. Monitored by the Reserve Bank of India, UPI works by instantly transferring funds on a mobile platform.

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So, what’s the catch?

We’re all familiar with the charges levied by banks for transactions carried out by various modes of payment, like NEFT, RTGS, mobile wallets and more. Surprisingly, UPI remained on the other side of the spectrum for a very long time, without charging its users any fee for transactions. At present, there are no charges for UPI transactions, both P2P and P2M (Person to Merchant), but as the user-base saw new heights, some banks started making announcements to their customers about the charges for P2P UPI transactions from May 01, this year.

Kotak Mahindra is to start charging for UPI transactions

Kotak Mahindra is the first bank that announced charges for P2P transactions made through UPI. The first 30 transactions in a month are not charged for, but beyond the cap, the bank is to charge for every UPI transaction. The bank wants to promote UPI as a very convenient mode of making transactions. According to Rohit Rao, the Chief Communication Officer of Kotak Mahindra group, the bank’s customers typically don’t transact more than 10 times through UPI in a month, and the charges post 30 transactions won’t affect genuine customers. He also added that the charges are introduced only to keep a lid on any abuse of UPI services.

The breakup

Transactions that amount to INR 1000 or below will be charged INR 2.50, and transactions higher than INR 1000 will be charged INR 5. This fee doesn’t include GST, which means, an additional 18% GST charges will be levied as well.

Kotak Mahindra also announced that charges do not apply to the payment of bills, online shopping, merchant payments, etc., and only P2P transactions are to be charged for, irrespective of the bank account or the UPI provider. Most believe that the charges won’t impact how the country uses UPI since most people don’t carry out more than 30 transactions, to begin with. Since P2M transactions remain to be uncharged for, this will not affect the usage of UPI.

We’ve seen a surge in UPI adoption in India, and we only expect it to see newer heights. We also talked about what an impact UPI has made in the fintech adoption in the country in our report The Era of Rising Fintech.

In 2018, HDFC sent an email to its customers about introducing charges on P2P UPI transactions from July 2018 but somehow reconsidered the same. There hasn’t been an update since.

With over 140 banks supporting UPI, we’re sure banks will catch on to the bandwagon sooner or later, and UPI transactions may no longer be free of cost.