Description of payment system fees and settlement cycles in India

Below is a description of the fee structure and settlement cycle of the major payment systems in India, applicable to both merchants and users:

I. Unified Payment Interface (UPI)

1. Cost structure::

   • Individual users: free of charge
   • Merchant Transactions: Usually charged a transaction fee of 0.3%-1% (minimum ₹2)
   • P2P transfers: fees may be charged for transfers over ₹2,000

2. settlement cycle::

   • T+1 working days (most banks)
     -Some banks support real-time settlement (additional fee required)

II. Immediate payment services (IMPS)

1. cost::

   • ₹5-15/stroke (segmented charges based on amount)
   • ≤ ₹1000: usually free or ₹5

   Rs. 10 lakhs deal about ₹25

2. close an account::
   Real-time payment (7 x 24 hours)

III. National Electronic Funds Transfer (NEFT)

1. cost::
   Business account.
   | Amount Range | Fees |
   |—————-|————-|
   | ≤10,000 | ₹2 + GST |
   | >100,000 | ₹25 + GST |

2. settlement cycle::
   Hourly batch processing, T+30 minutes at the latest

IV. Debit/credit card payments

• MDR rates (Merchant deduction rate).

pie title MDR rate distribution (2023)

"Offline Debit Card": "0.4%"

"Online Debit Card": "0.9%"

"credit card": "1.8-3%"

Special industry surcharges up to 4%

V. Wallet-type services (Paytm/PhonePe etc.)
-Recharge.
- UPI transfers are free
-Bank card top-up collection 1-3%
-Withdrawal.
-Fixed fee per transaction (e.g. Paytm charges 4%)

Recommendation.
-UPI for small amounts of HF
-RTGS recommended for large folios (≥ Rs. 20 lakhs only ₹55)
-Cross-border collections consider PNB's BBPS system

Note: GST rates are 18% and may be adjusted due to bank/RBI policies.

Below is a detailed description of other key mechanisms of the Indian payment system, along with practical suggestions for optimising transaction costs:

V. Supplementary rules for prepaid payment instruments (PPI/Wallets)

1. Advanced cost structure::

   • Cross-border top-ups: Additional charge of 2.5%+GST (e.g. Paytm Cross Border Commerce Solution)
   • merchant settlement: Fee-free withdrawals during T+3 cycle, after that ₹5-20 per withdrawal
   • Failure management: ₹250 per month deducted from inactive accounts for 12 months until balance is cleared

2. Innovative Features Surcharge::

flowchart LR

    A[Wallet Balance] --> |Sweep Payment| B(0% Handling Fee)

    A --> |transfer bank| C(1% min ₹10)

    A --> |Buy Gold/Funds| D(0.5-1.2% platform fee)

VI. Emerging payment modalities

6.1 Automatic recurring payments (eMandate)

• typical scenario: SaaS subscriptions/insurance premiums
• cost model::
  • Registration fee: ₹10-50/authorisation
  • Execution fee: 0.3% per transaction (40bps lower than regular card transactions)

6.2 Bharat BillPay (BBPS)

pie title BBPS tiered rates 

"Utility Bill" : "0.25%" 

"Education contribution" : "0.65%" 

"DTH top-up" : "1% cap ₹15"

VII. Special mechanism for cross-border settlement

7.1 Inward Remittance Compliance Requirements:

• Minimum Documentation: KYC+ Purpose Code
• tiered fee structure::

Amount Range | SWIFT Fee | GST Processing Fee  

----------- | --------------- | ----------

< Rs. 500,000 | ₹750 + middle bank deduction | ₹118   

>Rs 2 lakh | ₹1500 onwards | ₹354+

7.2 Export Collection Acceleration Programme:

Through PNB's EPC portal it is possible to.

+ T+3 settlement guarantee  

! A copy of the commercial invoice is required  

VIII. Dispute resolution cost matrix

Risk Warning: 3-5% margin required for credit card transactions to cover potential declines

IX. Rate optimisation strategy for 2024

1️⃣ hybrid routing technology : Intelligent triage of ≥ Rs. 5000 transactions to low-cost channels (e.g. IMPS instead of UPI saves 30bps)

2️⃣ Comparison table of advantages of direct connection of clearing houses::

Merchants with a monthly turnover of over $2 million are advised to apply for NPCI Direct Membership.

Industry-specific customised solutions are required (e.g. e-commerce vs ed-tech), with more detailed sandbox data available.