Users’ Linked Bank Accounts And UPI Transactions Remain Unaffected
Digital payments giant PhonePe has clarified that recently introduced inactivity charges apply only to dormant PhonePe Wallet balances and will not impact users’ linked bank accounts or Unified Payments Interface (UPI) transactions.
The clarification comes after several users received notifications regarding inactivity charges of up to ₹100 per quarter on PhonePe Wallets that have remained inactive for more than 12 months. The alerts sparked confusion and concern among customers, many of whom feared that the charges could be deducted directly from their bank accounts or recovered through UPI transactions if their wallet balance was insufficient.
In response, PhonePe issued a clarification stating that the inactivity fee is limited exclusively to its prepaid wallet service and does not affect funds held in bank accounts linked to the platform.
What Exactly Is The Inactivity Charge?
According to PhonePe, the inactivity charge applies only to the PhonePe Wallet, which operates as a prepaid payment instrument (PPI). The wallet is a separate financial product from the company’s UPI service, even though both are accessible through the same application.
The company explained that wallet balances are maintained independently from bank account balances. As a result, any inactivity fee can only be deducted from the funds available within the wallet itself.
PhonePe further clarified that if a wallet has a zero balance, no fee will be charged. Additionally, wallet balances will never become negative because of inactivity charges, and no amount will be recovered from a user’s linked bank account under any circumstances.
Why Did The Notifications Create Confusion?
Many users regularly use PhonePe for QR code payments, money transfers, utility bill payments, and merchant transactions through UPI. However, a significant number of these users rarely use or maintain balances in the PhonePe Wallet.
Because wallet activity and UPI activity are monitored separately, a customer can remain highly active on PhonePe through UPI while their wallet remains inactive for months or even years.
This distinction led to confusion when users received inactivity notifications despite frequently using the PhonePe application. The company clarified that wallet inactivity is assessed independently of UPI transaction activity.
Advance Notice Before Any Deduction
PhonePe said it follows a notification process before deducting any inactivity charge. Customers receive an alert at least 15 days before the fee is applied, giving them sufficient time to reactivate the wallet if they wish.
Users can add funds, make a wallet transaction, withdraw eligible balances, or simply choose whether they want to continue maintaining the wallet. The company said the notification system is designed to ensure transparency and avoid unexpected deductions.
An Industry-Wide Practice
The Walmart backed fintech company noted that inactivity or maintenance fees on dormant prepaid payment instruments are common across the digital payments ecosystem.
According to PhonePe, wallet providers incur ongoing compliance, operational, regulatory, and infrastructure costs even when wallets remain inactive for extended periods. The inactivity fee helps cover these maintenance requirements.
The company emphasized that similar practices are followed by several prepaid wallet operators across the financial services industry.
Growing Focus On Wallet Compliance
As digital payments continue to grow rapidly in India, regulators have placed greater emphasis on compliance and operational oversight for prepaid instruments. Wallet providers are required to maintain customer records, security systems, regulatory reporting, and infrastructure regardless of whether a wallet is actively used.
PhonePe said the policy aligns with industry norms and is intended to manage dormant wallet accounts efficiently while maintaining compliance with regulatory requirements.
What This Means For Users
For most PhonePe users who rely primarily on UPI payments, the clarification offers reassurance that their bank balances and payment capabilities remain unaffected.
The company reiterated that UPI transactions continue to operate directly through linked bank accounts, and inactivity charges apply only to unused wallet balances. Customers with inactive wallets can choose to reactivate them or allow the wallet to remain dormant without worrying about deductions from their bank accounts.
PhonePe’s clarification is expected to ease concerns among millions of users who initially misunderstood the notifications and feared that the charges could impact their everyday digital payment activities.
