Archive · 22 Aug 2026
India Opens Door to Possible UPI Merchant Fees
India has removed a rule that stopped businesses from being charged for accepting UPI payments.
This does not mean customers will immediately pay a new fee.
Instead, it allows the government to create a possible fee for some merchants.
Reports suggest the fee could apply mainly to large payments above Rs 2,000.
Ordinary grocery stores, restaurants, bakeries, and fast-food outlets usually have much smaller average payments.
A 0.3% fee on the average Rs 606 merchant payment would be about Rs 1.82.
That money could be divided among the shop’s bank, the payment app, and NPCI.
India is studying how other countries charge for similar instant-payment systems.
The government and NPCI still have to decide whether a fee will be introduced and how it will work.
Parliament removed a legal ban on charging merchants for UPI payments, but no fee has yet been imposed.
A possible merchant discount rate could be 0.3% to 0.5% on payments above Rs 2,000, though rates remain undecided.
The average merchant UPI payment was Rs 606 in July 2026, generating only about Rs 1.82 at a 0.3% rate.
The threshold would largely protect ordinary shops, whose average payments are below Rs 2,000, but “Others” accounts for nearly half of merchant value.
UPI pricing is also linked to competition concerns, app market-share limits, and comparisons with payment systems in Indonesia, Brazil, Europe, and the United States.
- Who
- The Indian Parliament and Centre changed the legal framework; the National Payments Corporation of India is considering possible fee details, affecting merchants and payment apps.
- What
- A legal ban on charging merchants for UPI acceptance was removed, enabling a possible merchant discount rate without imposing a current customer charge.
- When
- The change and proposal are in 2026; the article cites July 2026 payment data and a December 2026 app-market-share deadline.
- Where
- India’s UPI payment system and the National Payments Corporation of India’s ecosystem.
- Why
- The amendment enables the government to specify possible charges; the article also discusses payment-system economics, app competition, and U.S. trade concerns.
Arguments Against or Cautious About Fees
Arguments Supporting an Enabling Framework
Effect on merchants and customers
Arguments Against or Cautious About Fees
A fee could add costs for merchants, and the article notes that ordinary UPI payments are small, limiting revenue while potentially creating pressure on businesses.
Arguments Supporting an Enabling Framework
The proposed framework places any initial fee on merchants rather than customers and uses a Rs 2,000 threshold intended to protect corner shops.
Revenue potential
Arguments Against or Cautious About Fees
A 0.3% charge on all merchant UPI value would theoretically raise about Rs 29,400 crore, but the article says the actual amount would be only a fraction because not all payments would qualify.
Arguments Supporting an Enabling Framework
Allowing a merchant discount rate could create a way to support the banks, apps, and NPCI involved in processing UPI payments.
International models
Arguments Against or Cautious About Fees
Indonesia, the closest comparison, announced a lower fee-free threshold from October 2026, suggesting that the country India might copy is reducing charges rather than increasing them.
Arguments Supporting an Enabling Framework
Other systems show that merchant or bank charges can coexist with free consumer payments, including Brazil’s Pix and the United States’ FedNow model.
- Average merchant UPI payment
- Rs 606 in July 2026
- Possible fee
- Reports suggest 0.3% to 0.5%, but no rate has been officially set
- Suggested threshold
- Payments above Rs 2,000 may be subject to a merchant fee
- July 2026 UPI volume
- 14.97 billion payments
- Merchant UPI value
- Rs 98.08 lakh crore in the year to July 2026
- Largest app shares
- PhonePe handled 46.2% and Google Pay 32.5% of UPI payments
- UPI market-share rule
- No single app may exceed 30%; the current deadline is December 2026