NPCI imposes 0.4% fee on UPI merchant transactions above ₹2,000

The National Payments Corporation of India (NPCI) has announced a 0.4 per cent fee on UPI merchant payments exceeding ₹2,000, marking the first time transaction charges have been levied on India's widely-used digital payment platform. The move follows recent amendments to India's payments legislation that enable payment system operators and banks to impose charges on high-value transactions.

The fee structure, effective from October 15, applies exclusively to merchant payments above the ₹2,000 threshold. Person-to-person (P2P) UPI transfers remain unaffected by the new charges, preserving the platform's appeal for individual users. NPCI, which operates the UPI infrastructure, said the uniform rate aims to establish a standardised approach across all participating banks and payment service providers.

The legislative amendment represents a significant shift in India's approach to digital payment economics. Previously, UPI transactions had remained free, contributing to the platform's rapid adoption across the country. Industry observers suggest the new fee structure may impact merchant behaviour and transaction volumes, particularly for small-value business payments that now cross the ₹2,000 threshold.

The timing of the announcement provides businesses and financial institutions with roughly three weeks to adapt their systems and inform customers of the changes. NPCI has indicated that the measure aims to create a more sustainable economic model for the UPI ecosystem while maintaining the platform's competitive advantages in the digital payments landscape.