NPCI allows UPI-based cash withdrawals at merchant points

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Published: March 19, 2020 2:02:13 AM

The facility for cash withdrawal must be available to a customer irrespective of whether they have made a purchase at that particular merchant outlet.

PhonePe was the first PSP to offer the UPI-based cash withdrawal facility in February when there was no clear regulation governing such withdrawals. PhonePe was the first PSP to offer the UPI-based cash withdrawal facility in February when there was no clear regulation governing such withdrawals.

The National Payments Corporation of India (NPCI) has allowed payment service providers to offer a facility to make cash withdrawals using the Unified Payments Interface (UPI) channel. A notification to this effect was issued on Monday, just about a month after PhonePe launched the facility. “This service is in line with the existing facility available at ‘Cash at Point-of-Sale (PoS)’ enabled by the cards,” NPCI said in the circular.

The transaction limits have been set at Rs 1,000 per day in tier-1 and tier-2 centres and Rs 2,000 per day in tier-3 to tier-6 centres. Only three transactions shall be permitted per account per payee UPI ID. “Interchange of 0.5% of the transaction value, subject to a cap of Rs 5 will be applicable for these transactions. Issuer may decide to charge customer up to 1% of transaction value, capped at `10,” the circular stated.

The customer will pay the remitter bank a customer convenience fee of up to 1% of the transaction value on such cash withdrawals. The remitter bank will pay the payment service provider (PSP) an interchange fee of 0.5% of the transaction value. The bank will also pay a switching fee to NPCI and a PSP fee to the payer PSP.

The facility for cash withdrawal must be available to a customer irrespective of whether they have made a purchase at that particular merchant outlet. PhonePe was the first PSP to offer the UPI-based cash withdrawal facility in February when there was no clear regulation governing such withdrawals. The matter then became a subject of discussion at the steering committee for UPI, housed within NPCI.

Anand Kumar Bajaj, founder and CEO, PayNearby, said: “We believe that the enablement by NPCI to access cash via UPI will help educate consumers to use UPI for payments also and slowly they will migrate to using UPI fully instead of taking cash only.”

Earlier, Vivek Lohcheb, head-offline business development, PhonePe, had told FE that the UPI-based cash withdrawal facility helps convert a cash transaction to a digital one. “A retailer pays the distributor on a daily or weekly basis for inventory. Generally, this is a cash transaction. We are now able to convert this to a digital transaction because during this ATM transaction, cash is getting converted into bank currency, which he will be able to use for making distributor payments as well,” Lohcheb had said.

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