NPCI Directs Banks To Allow Cash Withdrawals Through UPI
Customers will soon be able to withdraw cash at specific merchant outlets through the Unified Payments Interface platform.
In a circular, issued on March 16, the National Payments Corporation of India directed all member banks to enable cash withdrawal services at merchant locations using the UPI platform from June 1, 2020 onward.
BloombergQuint has reviewed a copy of the circular. NPCI officials did not immediately respond to a message from BloombergQuint.
Under the service, a UPI customer can withdraw up to Rs 1,000 per day in Tier-1 and Tier-2 centres. A customer can withdraw up to Rs 2,000 per day if they are in Tier-3 to Tier-6 centres, through their UPI-enabled mobile payments application.
The NPCI has set a transaction limit of three per day for each UPI payee or each UPI virtual payment address of a customer.
The fee structure set by the for the UPI cash withdrawal service is as follows:
- Transaction fee up to 1 percent of the transaction value, capped at Rs 10, paid by the customer to the remitter bank, which provides the cash to the merchant.
- Interchange fee of 0.5 percent of the transaction value, capped at Rs 5, paid by the remitter bank to the payment service provider.
- Switching fee, paid by the remitter bank to the NPCI, of Rs 10 paisa for transactions below Rs 1,000 for P2P transactions. This fee will stand at Rs 50 paisa for P2P transactions above Rs 1,000.
- P2P fee ranging between 10 to 50 paisa per P2P transaction, that is paid by the remitter bank to the payment service provider.
The idea of allowing cash withdrawals at merchant outlets is not new but has failed to gather steam in India. So far, the Reserve Bank of India has been trying to encourage cash-out facilities through debit card transactions at point-of-sale machines. The Nandan Nilekani committee on digital payments had recommended in June last year that the RBI and NPCI, could create a framework and guidelines for cash-in and cash-out networks across the country.
In line with this thinking, the NPCI has now decided to offer cash withdrawals via UPI.
Such cash withdrawals will not require PoS machines or debit cards.
The payee can request for cash via their UPI-enabled PSP application, like Google Pay, PhonePe or Paytm, for instance. The merchant can provide cash after receiving the withdrawal request on their PSP application.
In its circular the NPCI said that third-party application providers and PSP applications should be responsible for conducting due-diligence on the merchant when on-boarding them for the service. The service should be added as a separate function on the application, the NPCI said. This is intended to ensure that a customer is informed of the type of transaction and the related charges, the circular added.
The circular added that UPI customers should be allowed to use this service at the merchant location irrespective of whether the customer makes a purchase or not. It asks that merchants prominently display the availability of the service along with the charges.
The payment service provider will also need to provide a customer grievance redressal mechanism to not only take care of general complaints but also issues related to counterfeit currency, the NPCI said.
Transactions on UPI have surged over the past two years. In February 2020, transactions on UPI soared to over Rs 2.25 lakh crore, according to NPCI data.