Are UPI transactions free? Private banks charge a fee if you use it over 20 times a month

Most private banks are charging Rs 2.5 to Rs 5 on person-to-person payments using the Unified Payments Interface (UPI) more than 20 times a month.

Though the government has prohibited such charges, bankers said they have introduced the charges to stop frivolous transactions from putting a load on the system, The Times of India reported.

According to a report published by Ashish Das from the Indian Institute of Technology (IIT) Bombay, lenders are interpreting the law to suit them, concluding while "payments" are expected to be free, "transfers" are chargeable.

Moneycontrol could not independently verify the story.

According to Das, payments are not separate from transfers. "Returning a small person-to-person loan amount is a payment. Similarly, giving gift money is also payment. A small roadside cobbler receiving payments or a student making a payment to a tuition teacher can all be done using UPI, where the law does not make it mandatory for the beneficiary to become a merchant (in the UPI sense) to receive such a payment," he was quoted as saying by The Times of India.

The value of UPI transactions has risen amid the COVID-19 pandemic. UPI transactions worth Rs 2.9 lakh crore were recorded in July 2020, as against Rs 1.46 lakh crore in the same period last year.