Axis Bank, Kotak Bank cap free peer-to-peer UPI fund transfers to 20 a month

UPI is the most preferred payment mode for a greater extent of P2P (Person to Person) transactions, and remained free for a long time

Kumar Shankar Roy Mar 18, 2020

Transfer of money between mobile walletsSay bye-bye to free unlimited peer-to-peer fund transfers via UPI from April, as at least two banks – Axis Bank and Kotak Mahindra Bank – have announced charges beyond 20 such transactions a month.

Unified Payments Interface or UPI is an instant real-time payment system developed by National Payments Corporation of India (NPCI) facilitating inter-bank transactions. The interface is regulated by the Reserve Bank of India (RBI) and works by instantly transferring funds between two bank accounts on a mobile platform. According to a LenDenClub study, new age technology UPI with 50% users has topped the chart for loan repayment followed by 47% of ECS payment in P2P lending.

Axis Bank and Kotak Mahindra Bank have sent out advisories to customers, intimating them of the upcoming charges. GST at 18% will be applicable on charges.

“With effect from 3rd April, 2020 the number of free UPI Peer to Peer fund transfers (using Send Money option on UPI apps) will be capped at 20 transactions per month. Any subsequent transactions in the month thereof will be charged…,” said Axis Bank.

From 21st transaction onwards in a month, Axis Bank will impose Rs 2.5 per transaction involving less than Rs 1,000 and Rs 5 per transaction involving more than Rs 1,000. Charges, however, are not applicable to Axis Priority, Axis Burgundy and Axis Burgundy Private scheme codes.

Kotak Mahindra Bank will be slapping charges on UPI Peer to Peer fund transfers from April 1, 2020. It will also charge Rs 2.5 per transaction of less than Rs 1,000 ticket size beyond 20 such transfers in a month, and Rs 5 per transaction of more than Rs 1,000 ticket size.

“UPI ‘Send Money’ fund transfers that will be charged post first 20 transactions are transfers done through Kotak Mobile Banking App, are transfers done through any PSP (Payment Service Provider) or 3rd party app, are transfers done using bank account and IFSC code,” Kotak Mahindra Bank said.

These type of charges will help banks earn more income for facilitating UPI P2P fund transfers on their own native banking platform or through 3rd party platforms like PhonePe, Paytm, Google Pay, Amazon Pay etc. But it remains to be seen, what will the effect of such charges be on UPI P2P fund transfer transaction volumes. Will people again go back to dealing in cash?

Kotak Mahindra Bank clarified that UPI transactions that will continue to have zero charges are merchant payments, online shopping, and bill payments.

UPI is used in peer-to-peer form by many because they can easily send and receive money from a friend or a family member. With so many UPI providers out there, with more and more cash backs and scratch cards and discounts, there has been a rise of UPI use 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.

Surprisingly, UPI remained free without charging its users any fee for transactions for a long time. But as the user-base rose to new heights, some banks have started making announcements to their customers about the charges for P2P UPI transactions.

Kindly note that NPCI about three weeks back revised the UPI interchange and payment service provider fees to “zero” for all domestic UPI merchant (P2M) transactions with retrospective effect from January 1, 2020. The move to do away with these fees came after abolishing of the Merchant Discount Rate (MDR). Payment service provider fees are the digital payments primary monetisation route for banks and UPI apps.

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. Kumar is a financial journalist, with a functional experience of 15 years. He tracks mutual funds, insurance, pension, PMS, fixed income/debt and alternative investments markets closely. He has worked for The Times of India, The Hindu Business Line, Deccan Chronicle Group, DNA, and Value Research, among others, across different cities in India. He is deeply interested in marrying data insights with actionable opinion. He can be contacted at [email protected].

Subscribe to our newsletter

Envolpe image

Want to grow your money?

Subscribe & keep learning!

 ⓘ Find the best performing mutual funds Explore

Mohammed Haseeb