Mumbai: The PhonePe-ICICI Bank issue has taken a turn for the worse with the payments firm stopping all unified payments interface (UPI)-based payments on its merchant Flipkart’s website.

“Under the current circumstances we believe it’s unfair to subject our own merchants, including Flipkart, to such poor service quality. We requested Flipkart to allow us to temporarily suspend UPI-based payments on the Flipkart app until this issue is properly resolved," PhonePe said in a statement.

PhonePe is Flipkart’s electronic wallet service and has a tie up with Yes Bank to provide UPI services.

“We have made multiple requests to NPCI (National Payments Corporation of India) to resolve the matter quickly. Unfortunately ICICI has refused to unblock UPI access—even after NPCI issued a public directive telling them to do so on Thursday. Then, without explanation, NPCI reversed it’s own directive via a press release on Friday night, but yet again failed to highlight exactly which interoperability guidelines they believe PhonePe is in violation off," PhonePe said in a statement.

The issue started with ICICI Bank blocking all UPI transactions with PhonePe, almost eight days ago. ICICI Bank had raised issues with alleged practices followed by PhonePe where customers could not make UPI transactions on Flipkart unless they had a payment address with the payments application. The bank said that the creation of @ybl virtual payment address that PhonePe uses violates the interoperability rules of the UPI platform.

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This had led to NPCI, the creator of the UPI platform, to involve itself with the issue. After a tripartite meeting with ICICI Bank, Yes Bank and PhonePe, NPCI issued a statement on Thursday, asking ICICI Bank to open up all UPI transactions and asking all banks to follow interoperability norms.

However, on Friday, NPCI did a U-turn and issued a new statement saying that Flipkart’s e-wallet service had violated interoperability norms.

An ICICI Bank spokesperson had earlier said that NPCI had given the bank a written assurance that PhonePe will allow interoperability. “As soon as this is corrected, ICICI Bank will start allowing UPI transactions to resume on this app," the spokesperson said.

ICICI Bank is one of the 10 promoters of NPCI and owned 7.47% of its shares as on 22 January 2016, according to the Watal committee report. In September, NPCI said it had broad-based its shareholding to include 46 new banks, but didn’t specify what the new shareholding structure is.

Yes Bank defended PhonePe in a statement to stock exchanges on Thursday, stating that the app had complied with all the rules laid down by NCPI. “All member banks who are offering UPI services have undergone exactly the same process and were allowed to go live only after complying with the same process," said Yes Bank.

Anirban Sen contributed to this story.

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