India to Charge a Fee on Larger UPI Business Payments: What Changes on Oct. 15
India's National Payments Corporation of India (NPCI) will levy a 0.4 percent fee on Unified Payments Interface (UPI) transactions above 2,000 rupees made to businesses, effective from October 15. Al Jazeera
UPI is India's system for instant payments by phone. The charge applies only to merchant transactions worth more than 2,000 rupees. It will be capped at 300 rupees per transaction. That 2,000-rupee threshold is about $20.93.
All person-to-person UPI transactions will remain free under the new policy. India's Press Information Bureau published official press release PRID 2310586 titled 'UPI Payments to Remain Free for Person to Person transactions; MDR Applicable Only on Large-Value Merchant Transactions'. The release states that no transaction fee, platform fee or other charge may be imposed on individuals for sending or receiving money through UPI. PIB
The Indian government calls the new levy the Merchant Discount Rate (MDR), the processing fee attached to a shop payment. UPI payments for fuel, railway tickets and telecom bills will incur a flat fee of five rupees per transaction, rather than the percentage rate. Merchants will be barred from passing the additional cost on to customers.
The scale of the system now subject to the charge is large. UPI processed an all-time record of 24.51 billion transactions last month, equivalent to 791 million transactions per day worth more than $10 billion daily. In the last financial year, UPI processed 241.6 billion transactions worth nearly $3.3 trillion, supporting 741 banks. Al Jazeera
UPI is live for merchant payments in 10 countries, including Singapore, the UAE, France, Sri Lanka and Qatar.
NPCI announced the fee on September 15, 2026. Banks cannot impose charges on UPI payments of up to 2,000 rupees. Reuters The 0.4 percent fee ends a period of more than six years of free UPI payments. Reuters
The broader context here is cost allocation in a high-volume, low-margin payments system. Zero fees helped adoption and pushed volumes to levels few instant-payment systems match. It also left acquiring banks, payment service providers and technology providers without direct transaction revenue from UPI.
Looking at what this means for market structure, the design splits the network in two. Person-to-person flows stay free with no value limit in the policy. Person-to-merchant flows above the threshold carry a set cost, with a cap to limit exposure on very large tickets and a flat rate for high-frequency regulated categories. Because merchant surcharging is banned, acquirers and merchants must negotiate or absorb the cost.
For readers tracking what travels abroad, the variables to watch are merchant acceptance above 2,000 rupees, acquiring economics at the 300-rupee cap, and whether the domestic MDR template reaches the 10 live merchant-payment corridors abroad. NPCI has set the rate and the date. Settlement data after October 15 will test the calibration.
