UPI adds fees to large transactions in India
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The National Payments Corporation of India (NPCI) will begin charging a Merchant Discount Rate (MDR) fee of 0.4 percent on UPI transactions exceeding 2,000 rupees (approximately $24 USD) starting October 15.
The fee, capped at 300 rupees per transaction, only applies when customers pay businesses, not individuals, through UPI. India’s Ministry of Finance asked banks not to pass this cost onto customers and set a flat 5 rupee fee for specific payments like rail tickets, fuel, and utility bills.
The NPCI previously operated with a zero-MDR policy, enacted in 2020 to encourage wider use of digital payments. However, a recent government report found that this system was financially unsustainable for the UPI ecosystem. The new fees, authorized by the Taxation and Other Laws (Amendment) Act of 2026, aim to create a reliable income stream for investment in the system. Critics argue the fees will disproportionately affect lower-income consumers.
However, officials point out that over 95 percent of UPI transactions fall below the 2,000 rupee threshold, and person-to-person transfers remain free. With over 24,000 crore (24 trillion) UPI transactions taking place in the 2025-26 fiscal year, totaling 314 lakh crore rupees, the fees are expected to improve competition and service within the digital payment market.
