Merchants accepting larger payments through the Unified Payments Interface will start paying 0.4% per transaction on amounts above ₹2,000 from October 15, a change that shifts previously subsidised processing costs onto businesses. The National Payments Corporation of India, which runs UPI, said consumers will not face a direct charge, but that the new merchant fee will apply to higher-value receipts. Each levy will be capped at ₹300.
Payments of ₹2,000 or less will remain exempt, and merchants who receive up to ₹100,000 a month through UPI are excluded from the charge, a carve‑out intended to protect small traders. Certain sectors, including railways, telecom, insurance and fuel, will face a flat ₹5 fee on transactions over ₹2,000, while transfers tied to capital‑market activity will be taxed at 0.02%, also capped at ₹300, NPCI said.
The move marks a structural shift for UPI, which was made free to merchants in January 2020 to accelerate adoption and has been subsidised by the state since. NPCI signalled the change by saying the network now carries significant costs, estimating annual operating expenses at about ₹200 billion, but it did not publish a public breakdown of how that figure was calculated or estimate the revenue the new charges will generate.
UPI’s scale underpins the challenge: in August the system handled 24.51 billion transactions worth ₹29.9 trillion, numbers that illustrate the volume of flows that NPCI must now fund. NPCI said proceeds from the merchant levy will be shared among participants across the payments chain and used to pay for infrastructure, cybersecurity, fraud prevention and customer service. The operator also plans to create a fund to widen digital‑payments infrastructure and merchant onboarding outside major cities, with details to be worked out with the country’s central bank over the next three months.
The adjustment creates immediate winners and losers within India’s fintech industry. Payment processors and gateway providers that invested in UPI rails, including established and IPO‑bound firms, will receive a share of the new fees. Retailers that accept higher‑value payments will face an added cost that did not exist before, and NPCI said regulators have barred merchants from passing the charge directly to customers.
Public debate has begun over the wider trade‑offs. Krishnamurthy Subramanian, a former chief economic adviser to the government, argued policymakers must weigh the social benefits of UPI against the cost of charging transactions, writing, “The right question is: what is the opportunity cost of charging UPI transactions and what are its social benefits?” The coming months will show whether merchants absorb the levy, adjust prices, or steer customers toward alternative payment methods for larger purchases.
