UPI to Charge Merchants 0.4% on Payments Over ₹2,000 From October 15
Shops that accept India's Unified Payments Interface, or UPI, for payments above ₹2,000 will pay a 0.4% fee starting October 15. The National Payments Corporation of India announced the rate on September 15, ending the zero-fee rule for larger UPI payments in place since January 2020. TechCrunch
The setup is tiered. Payments of ₹2,000 or less stay free for merchants to accept. All transfers between consumers stay free, at any amount. For larger shop payments, the 0.4% charge, known as MDR or merchant discount rate, is capped at ₹300 per transaction. That cap sets the maximum on payments of ₹75,000 and above.
Shops that receive up to ₹100,000 per month through UPI will not pay the charge.
In August, UPI processed 24.51 billion transactions worth ₹29.9 trillion, according to NPCI data. NPCI cites industry estimates that running the network costs about ₹200 billion a year, covering processing infrastructure, cybersecurity, fraud prevention and customer service. It said the new fee income will be shared among the banks, apps and processors that keep the system running.
India changed its payments law in August to allow merchant fees on some UPI transactions. NPCI said the notified 0.4% rate applies specifically to person-to-merchant payments, where a customer pays a business. Times of India
The rate follows more than a year of discussion. In April 2025, authorities proposed a 0.2% to 0.3% merchant fee to support the domestic network. Reuters By early August 2026, the government was considering 0.3% to 0.5% on transactions above ₹2,000. Reuters
The broader context here will be familiar to payments engineers. Free acceptance helped UPI grow quickly, like a toll-free road that draws traffic. It does not pay for fraud controls, dispute handling and reliable uptime. A threshold keeps small payments free, where shoppers and small sellers are most sensitive to cost, while asking larger merchants to help fund the system.
In my view, the details around the 0.4% matter more than the headline number. The ₹2,000 floor keeps routine shop payments untouched. The monthly exemption spares the smallest sellers added paperwork. The ₹300 cap keeps very large UPI payments workable alongside cards and net banking. One point to watch is how providers pass the fee through, and whether larger stores steer high-value buyers elsewhere. Over the longer term, this tests whether a limited fee can fund reliability without losing ubiquity.
