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Kotak Mahindra Bank Becomes the First Lender To impose charges on UPI transactions, namely, Paytm, Google Pay, PhonePe

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Starting from 1st May, 2019, India’s private sector bank, Kotak Mahindra Bank would become the first lender to levy charges on peer-to-peer (P2P) UPI transactions available across all platforms, namely, Paytm, Google Pay, PhonePe, Trucaller Pay among others.Kotak Mahindra Bank

  • For Kotak Mahindra Bank’s account holders, the first 30 peer-to-peer UPI fund transfer would be free of cost.
  • Once a person exceeds 30 UPI transactions, he will be charged Rs. 2.50 per transaction for of Rs. 1000 or less. For transfers exceeding Rs. 1000, the bank will charge Rs. 5 plus 18% GST.
  • No additional charges have been imposed upon reception of money via UPI for merchant transactions or bill payments.
  • Since more than 90% of Kotak Mahindra Bank’s customers do an average of 5-10 transactions every month, and the charges would be levied only when a customer exceeds 30 transactions, this step has been taken to curb abuse of the UPI system.
  • There has been a reduction in charges on merchant transactions through UPI .
  • Instead of the 25 paise charge on transactions up to Rs. 1000 and 50 paise charge on exceeding Rs. 1000,  NPCI (National Payments Corporation of India) has brought it down to a flat rate of 10 paise for all transactions (along with an ad valoreum charge of 0.04% divided between the issuing bank and the acquiring bank).

What is UPI?

Unified Payments Interface is an instant dynamic (real-time) payment system developed for smoothening the process of inter-bank transactions.

  • It has been developed by NPCI (National Payments Corporation of India).
  • Since demonetization, UPI (Unified Payments Interface) was the chief contributor of the digital payments push.
  • UPI is predominantly a peer-to-peer payment mechanism with less than 15% accounted for by merchant payments.

What is NPCI?

  • The NPCI is an organisation founded in 2008 and is owned by a conglomeration of major banks. It has been promoted by RBI, the central bank of India.
  • NPCI provides numerous services, namely, RuPay, BHIM, UPI, Bharat BillPay, BHIM Aadhaar Pay etc.