Gone are the days when banking was restricted to the four walls of a bank. The days of queueing up at the bank for simple transactions are long gone. Consumers do not have to visit the bank for money transfers, bill payments, or even the simplest of things like checking their balance. With the advancement of technology and digitisation of basically every aspect of our lives, banking, too, has come a long way. This all has been made possible by the development of systems like the UPI.

Let us understand what UPI is and how it has revolutionised banking in India-

United Payments Interface, or UPI for short, is a a method of transferring funds developed and launched by the National Payments Corporation of India in 2016. The entire system is backed by the Govt. of India in an attempt to foster the digitisation of banking in India and make simple transactions and banking activities accessible to everyone across the Nation. It works to envelop banking consumers from all areas, all avenues and all strata with a particular focus on the common masses who otherwise may be left out of many financial facilities. It aims to inculcate financial inclusion in India and has entirely revolutionised how banking is done today.

The main function of UPI is to facilitate instant real-time fund transfers across different bank accounts. It can allow personal peer-to-peer transactions, business transactions, bill payments, checking bank balances, etc. Its diverse range of services and benefits makes it a perfect tool for small-value transactions for everyday banking. Its popularity has increased immensely as it has seamlessly integrated itself into the day-to-day banking and lifestyle of Indians across the nation. From the plains of Tamil Nadu to the hill stations of Shimla, UPI transactions have taken hold over how Indians now use digital payments. The fact that it is real-time has no fixed working hours, and can be used 24X7 makes it super convenient, accessible and hassle-free. UPI surely has become the go-to method of payment for everyone across India.

When it comes to banking and finance, it is always important for you as a consumer to know what you are using and how it will affect you. Of course, digital payments can be tricky as they involve a cashless transaction. That is why, in the section below, we will explain the UPI transaction rules and UPI transaction charges so that you can always be well-informed before you use the services.

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Let us first look at the UPI transaction charges –

1: UPI does not levy transaction charges for peer-to-peer or consumer-to-business transactions. One of the main reasons why UPI was so easily and widely accepted was that it does not come with additional costs or hidden charges. If the transaction is well within the limits set by UPI and NPCI, a UPI transaction will not be charged.

2: You might have to incur a small amount for businesses and merchants while accepting payment via UPI. However, they are significantly less than traditional payment systems like credit or debit cards. They typically bear these charges levied on the business or merchant as part of their finances. There is also something called the MDR- which stands for Merchant Discount rate, which is a subsidised fee for transactions. It typically ranges from 0.25 % to 1% of the transaction value, depending on the amount and volume of the transaction. However, the fee is minimal and often waived off for small-value transactions; it is only for high-volume businesses where the MDR is applicable and might incur a higher rate.

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3: UPI also charges a certain amount for specific services like ATM withdrawals, bill payments and recharges. For ATM withdrawals using UPI, there might be bank-specific fees that the consumer has to bear. There are no fixed rates for this, and it depends on your bank. Some service providers may charge a convenience fee while using UPI to pay utility bills or recharge. However, UPI does not charge this, and this also depends on the service provider. For example, when recharging your phone on applications like Google, you might have to pay a nominal extra amount in addition to the amount of the recharge.

4: Generally, transactions involving debit card fund transfers with UPI are free or may carry very minimal charges, but if you are using a Credit Card to transfer funds via UPI, that may incur additional and higher charges. Credit Card providers generally levy a 1% or 2% transaction fee while processing your UPI transaction through UPI.

5: Although it is very rare and unlikely, in some instances, multiple failed attempts or failed transactions due to reasons like technical glitches, insufficient funds, etc, you might be charged some processing fee by the bank in that case. This is relatively unlikely but not impossible. To avoid such issues, users are always advised to avoid making multiple attempts for a failed transaction. Instead, it is better to wait a few minutes to a few hours until the transaction details are updated to avoid any unnecessary hassle like multiple deductions.

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6: Certain UPI-enabled applications may levy a small service fee for premium services like reminders and alerts for bill payments, instalments, etc. This will be mentioned in the terms and conditions when requesting such a service. Users have to read the fine print before applying or registering for such value-added services

To make informed choices, it is certainly in the user's best interest to be aware of these UPI transaction charges.

Now, let us understand the UPI transaction rules –

Registration- Registration is the first rule for performing UPI transactions. A user should have a registered UPI-enabled application like Googlepay, Paytm, PhonePe, etc., which should also be linked to their bank account. This will enable them to perform all UPI transactions.

UPI ID and/or VPA- Since UPI is a fund transfer system that eliminates the requirement for other bank details like account numbers, IFSC codes, etc, there is something called a UPI ID or a Virtual Payment Address that is required to facilitate UPI transactions. So, when you register on a UPI platform, you are given a unique UPI ID that becomes your VPA. Typically, it is either in the form of an email ID like xyz@bankname or your phonenumber@bankname. This UPI ID will be used while making and receiving payments over UPI.

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Transaction limits- Since the NPCI governs the UPI, it is subject to the rules and regulations set by it. As per NPCI, the transaction limit for a UPI transaction is set at INR 1,00,000 – One lakh Rupees for a single transaction. This can mean multiple small value transactions amounting to 1,00,000 in cumulative total or a single transaction of 1,00,000 in a day, But users need to know that some banks will not allow for a single transaction of 1,00,000 at a single time, and the transaction amount might have to be broken down to an amount that meets the bank's UPI transaction limit.

UPI PIN, security and Safety- When making a UPI transaction, users will be prompted to authenticate the transaction with a two-factor authentication process, including entering your UPI PIN from your registered device. As a safety and precaution measure, UPI has been designed to combat fraud, scams and unauthorised transactions by allowing only end-to-end encryption data that enables multiple layers of security. As a general best practice, users should never share their UPI PIN with anyone else and should always double check and verify the details of the transactions like account, UPI ID and amount before proceeding with the transaction. This ensures maximum security and safety.

Using UPI with multiple bank accounts- UPI's versatility allows you to use the same UPI ID to link multiple bank accounts and make transactions. This makes it very flexible and convenient since you do not have to swap between alternate banking apps for simple transactions. However, you have to make sure that you are using the correct bank account for the transaction you are about to make.

Multiple attempts or cancelled transactions- Since UPI makes use of the internet connection and cell phone reception to make the transaction, sometimes due to technical errors the transaction may not go through or it may show as failed. To avoid multiple transactions and risk multiple deductions- users are

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Conclusion

UPI has been instrumental in digitising the world of banking and finance in India, so much so that it has taken over most small-value transactions in the day-to-day lives of all Indians. This system of real-time payment has made so many things easier, accessible and possible for Indians across all regions and all strata. The financial inclusivity that it has brought along with it remains unmatched. From personal transactions like money transfers to business transactions like paying for items, purchases, utility bills, recharges, etc- UPI has made transactions seamless and hassle-free. It is backed by NPCI and the Govt. of India, so it is also safe, secure, and reliable. UPI has brought a revolutionary change in the world of banking and finance in India and will continue to serve crores of Indians across the nation.

As users, certain rules and general mandates need to be followed while using UPI, like not sharing with anyone, not divulging your UPI ID to unreliable sources or sharing bank account details with others. If you practice safe and careful habits- UPI transactions will make your banking so much easier and convenient. It eliminates the need to visit the bank for the smallest of things and share all your banking details while making online transactions because UPI works on UPI ID or VPA, which does not need sharing of bank details unnecessarily. UPI has changed the way Indians do transactions and has certainly made digital transactions more accessible for everyone.

FAQs

Do I have to pay extra charges for paying to a business account via UPI?

Typically, a payee does not have to pay extra charges while paying to a business account via UPI. Sometimes, certain merchants might levy platform fees, but that completely depends on the merchant.

Are there any charges for linking your bank account to your UPI?

No, as per the rules mandated by the NPCI, there aren't any charges for linking your bank to your UPI.

Is UPI valid to use while travelling abroad?

No, as of now UPI is only functional between bank accounts of domestic banks. If you are travelling abroad, UPI does not work across borders, and you cannot make international transactions via UPI.

Is UPI functional without a registered bank account?

No, UPI is not functional without a registered bank account. To process transactions through UPI, you need to be identified through a linked bank account.

Do third-party UPI-enabled platforms like Google, Paytm, etc, charge users extra?

No, generally, third-party UPI-enabled platforms, such as Google Pay and Paytm, do not charge users extra for using the platform.

What is a UPI ID, and how to create it?

A UPI ID is a unique identifier required for conducting transactions without entering all bank details while using a UPI-enabled platform. You can create it by using your phone number or your username@bankname.

What is the maximum transaction limit for UPI-based transactions?

The maximum transaction limit for UPI-based transactions is 1,00,000 – One lakh per day.

Can I use multiple bank accounts for the same UPI?

Yes, it is possible to use multiple bank accounts for the same UPI