UPI merchant fees start on 15 October for larger payments
India's National Payments Corporation will charge merchants on UPI transactions of 75,000 rupees or more from 15 October, while consumers keep paying nothing.
The National Payments Corporation of India will start charging merchants on larger UPI transactions from 15 October, ending the zero-fee model that has kept merchants on the network since 2020. Consumers will not pay the new charge, NPCI said.
What the fees are
The merchant fee is capped at 300 rupees on transactions of 75,000 rupees or more, and payments of 2,000 rupees or less stay free for merchants. Small merchants taking up to 100,000 rupees a month over UPI are exempt. Railway, telecom, insurance and fuel transactions above 2,000 rupees attract a flat 5-rupee fee, while capital-market transactions pay 0.02%, capped at 300 rupees, according to the FAQ published alongside the change.
NPCI's own comparison puts credit card merchant fees at 1.5% to 2.5% per transaction and debit card fees at a maximum of 0.9%, so UPI's headline rate stays far below card pricing.
Why it is happening
NPCI says running the network costs about 200 billion rupees a year, covering server capacity, fraud prevention and technical support, and that the new charges will be shared across the UPI ecosystem and spent on infrastructure, cybersecurity, fraud prevention and customer service. UPI processed 24.51 billion transactions worth 29.9 trillion rupees in August alone.
The groundwork was laid in August, when India amended its payments law to allow merchant fees on some UPI transactions. A notification issued on Monday confirmed that banks cannot levy charges on UPI payments of up to 2,000 rupees. NPCI has not said how it arrived at the 200 billion rupee estimate, how much revenue it expects or how the money will be divided.
Krishnamurthy Subramanian, a former chief economic adviser to the Indian government, argued that UPI should be treated as digital public infrastructure. Writing on X, he said the right question is the opportunity cost of charging for UPI transactions against their wider social benefits.
Our opinion
UPI was never going to stay free forever. A network processing 24.51 billion payments a month carries a real bill, and somebody was always going to start paying part of it. Targeting only larger transactions and exempting small merchants is the least disruptive way to make that change, and keeping consumers out of it protects the habit that turned a printed square into India's default way to pay. The open question is what the money buys. The industry has argued for years that the free model starved UPI of investment in fraud prevention, so that is where the new revenue should visibly land rather than being quietly absorbed as another cost of trading in India.