India may introduce merchant fees for payments via UPI
On August 10, India’s parliament passed a bill that would allow banks and payment companies to charge merchants a fee for payments via the Unified Payments Interface (UPI) above a threshold yet to be determined. As Channel NewsAsia reports, this marks a departure from the zero-fee policy for merchant UPI transactions in force since 2020.
UPI is India’s instant payment system for transfers between bank accounts. According to a government study published in February, UPI accounts for 57% of consumer transactions in the country, compared with 38% for cash. In a 2025 report, the International Monetary Fund called UPI the world’s largest instant payment system by transaction volume.
Costs for businesses
India’s Finance Ministry said the fee would be small and significantly lower than charges for card payments. At the same time, business owners and industry representatives fear that even a 0.5% rate would noticeably affect low-margin businesses.
Mahabelly restaurant owner Zachariah Jacob said that around 60% of payments at his three establishments are made via UPI. In some months, the volume of such payments reaches 10 million rupees, so a 0.5% fee would cost his business about 50,000 rupees per month. By his estimate, restaurants retain around 7–8% of revenue as profit.
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National Restaurant Association of India Vice President Zorawar Kalra believes restaurants could potentially absorb a fee of 0.1–0.2%, but at rates starting from 0.5%, many companies will begin to question whether they can continue doing so.
Threshold and payment model
Large payments are particularly important for merchants selling expensive goods and for distributors. Harsh Bhudolia, co-founder of the Takkada platform, noted that the technological costs of processing a payment of 50,000 rupees generally do not differ from the costs of a 500-rupee transaction, while a percentage-based fee would be 100 times higher.
India’s Finance Ministry said in August that UPI’s rapid growth requires further infrastructure upgrades, stronger cybersecurity, and fraud prevention, and that relying solely on subsidies for the next stage of the system’s development is impossible. According to government data, the number of monthly UPI transactions rose from 6.3 billion in July 2022 to 23.6 billion in July 2026. India spent about 82.7 billion rupees on UPI incentives over the four financial years through March 2025.
