An interchange of 1.2 per cent for credit lines on UPI transactions is likely to be announced by the National Payment Corporation of India (NPCI) soon. This is as per a report by Moneycontrol. A circular for the same is likely to be issued by the NPCI next week.
Between NPCI, banks, and UPI apps, discussions are on the parent's share of the revenue. PhonePe, Google Pay, and other third-party apps will likely get 8 basic points from every transaction, according to the report.
As per Investopedia, “an interchange fee is a small amount of money that a merchant pays when you make a purchase with a credit or debit card. This fee goes mostly to the credit card issuer and is set by the card payment networks, like MasterCard, Visa, and others.”
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It usually consists of a predetermined fee plus a percentage of one’s transaction. Further, it covers the costs of issuing cards to customers, taking on credit risk, and approving transactions. In this transaction, consumers do not have to pay any fees.
The report adds that the discussions are not final and there could be some change in rates. Payment Service Provider (PSP) banks will receive a commission of about 8 basis points for the transaction, according to the report.
A third-party organisation known as a payment service provider (PSP) assists organizations and individuals in safely processing electronic payments.
While the credit line was announced last year, it has not taken off yet. The central bank, in a circular, mentioned, "As announced, the scope of UPI is now being expanded by the inclusion of credit lines as a funding account.”
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It further added, “Under this facility, payments through a pre-sanctioned credit line issued by a Scheduled Commercial Bank to individuals, with prior consent of the individual customer, are enabled for transactions using the UPI System.” So, in simple words, a credit line is pre-sanctioned loans at banks through UPI.
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