India to Add 0.4% Merchant Fee on Some Larger UPI Payments

India’s Unified Payments Interface will impose a 0.4% merchant fee on certain payments above ₹2,000, according to NPCI. Consumers will continue to use UPI for free, and payments of ₹2,000 or less will remain free for merchants. The change ends years of free merchant processing for larger UPI transactions.

The merchant fee is capped at ₹300 for transactions of ₹75,000 or more. Small merchants receiving up to ₹100,000 a month through UPI will be exempt. Some sectors, including railways, telecom, insurance, and fuel, will pay a flat ₹5 fee on UPI transactions above ₹2,000, while capital-market transactions will attract a 0.02% fee capped at ₹300.

Authorities are seeking to make UPI financially self-sustaining after years of rapid adoption and government support. UPI processed 24.51 billion transactions worth ₹29.9 trillion in August, according to NPCI data cited in the report. NPCI said the fees will help fund infrastructure, cybersecurity, fraud prevention, and customer service across the UPI ecosystem.

Merchants will not be allowed to pass the fee on to customers, NPCI said, arguing the 0.4% charge is low enough for businesses to absorb. The shift could boost revenue for payment companies that help process UPI transactions, including Paytm, Pine Labs, PhonePe, and Razorpay. The key test will be whether merchants absorb the added cost or steer larger purchases toward other payment methods.