PhonePe clarifies: Wallet inactivity fees don't affect bank accounts or UPI
PhonePe has clarified that inactivity fees charged on dormant wallets do not impact users' linked bank accounts or UPI transactions. The clarification came after notifications sent to some customers caused confusion about how digital wallets work.
The fees apply only to the PhonePe Wallet, which is a prepaid payment instrument (PPI), and not to payments made through the Unified Payments Interface (UPI), where funds are debited directly from a bank account.
Many consumers mistakenly think their PhonePe account, UPI account, and PhonePe Wallet are the same. In reality, they operate independently and are subject to different rules.
A key concern is whether inactivity charges can be recovered from a bank account if the wallet balance is insufficient. PhonePe confirmed that no deductions would be made from linked bank accounts or through UPI, and wallet balances would not become negative.
Even users who actively use the PhonePe app for UPI payments may receive inactivity alerts, because wallet activity and UPI activity are tracked separately. A wallet can be classified as inactive even if the user frequently makes UPI transactions.
PhonePe said affected users are notified 15 days before any inactivity fee is deducted from the wallet balance, allowing time to reactivate the wallet, add funds, withdraw eligible balances, or close the wallet.
Reactivation typically requires only OTP verification and a wallet transaction, not necessarily a Full KYC upgrade.
Cashback credits are stored in a separate gift card balance, not the PhonePe Wallet itself, so receiving cashback does not automatically mean the wallet is active or subject to inactivity deductions.
Wallet inactivity fees are not unique to PhonePe and are charged by some prepaid payment instrument providers to cover maintenance and compliance costs for dormant accounts.
For users who have received a notification, the key takeaway is that these charges apply solely to the wallet balance, not to bank accounts or UPI-linked transactions.
