India's UPI ends free era with fee on large merchant payments
Merchants will pay the fee on larger UPI purchases, while consumers and small vendors remain exempt under the new framework.
- On Monday, the Union Ministry of Finance issued a gazette notification barring banks from charging fees on UPI transactions up to ₹2,000, while establishing a 0.4% Merchant Discount Rate on person-to-merchant payments exceeding ₹2,000 from October 15, 2026.
- Rising infrastructure costs drove the shift, as NPCI estimates annual UPI operating expenses at about ₹20,000 crore for server bandwidth, fraud prevention, and technical support, prompting regulators to abandon the zero-fee model.
- Essential sectors like railways and fuel face a flat ₹5 fee per transaction above ₹2,000, while capital market payments attract 0.02% MDR, with officials stressing charges apply only to merchants, not consumers.
- Congress leader Rahul Gandhi alleged on Tuesday that the government's policy surrenders to American pressure, branding the fee structure a "Modi Tax" that will burden inflation-weary citizens amid rising costs.
- To protect small businesses, the framework exempts vendors receiving up to ₹1 lakh monthly through UPI, while 5% of collected MDR funds support digital infrastructure in underserved markets and rural areas.
124 Articles
124 Articles
What India Gains By Charging An Ultra Low MDR Fee To Keep UPI Payments Free
The debate over charging for UPI transactions has increasingly focused on a simple question: if UPI costs money to operate, why should users not pay for it? The argument sounds straightforward. Banks, payment companies and the wider financial ecosystem have costs to bear, while UPI transactions have largely remained free for consumers. The government has […]
Govt sets 0.4% fee on UPI payments above Rs 2,000 amid political criticism
Ending nearly six years of fully free UPI payments, the government on Tuesday introduced a 0.4 per cent fee on transfers worth more than Rs 2,000 made to merchants through the platform from October 15 while explicitly ring-fencing everyday person-to-person transactions as well as small payments from any charge. “Customers will not be required to pay any charge when making such payments through UPI,” the finance ministry said in a statement, addi…
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Centre introduces 0.4% MDR on UPI payments above ₹2,000 made to merchants
From October 15, a 0.4% merchant discount rate applies to UPI person-to-merchant payments over 2,000, with consumers unaffected; person-to-person.UPI charges, merchant discount rate, UPI payment changes, new UPI fees, digital payment updates, person-to-merchant payments, finance ministry UPI, NPCI transaction fees, UPI infrastructure investment, digital investing costs, essential sector payments, utility bill payments UPI, educational fee paymen…
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