- India’s UPI system may introduce a 0.4% fee on high-value merchant payments
- No charges currently apply to UPI transactions under Rs 2,000 as per government rules
- Proposed fees would target person-to-merchant payments, not peer-to-peer transfers
India's UPI payment system could be heading towards a new fee structure, with NPCI and the RBI consulting banks and payment firms on a proposed charge of around 0.4% on high-value merchant transactions, Reuters reported.
However, the rate has not been finalised, and consumers are not currently being charged.
The discussions come a day after the government notified that banks and payment system providers cannot impose direct or indirect charges on UPI transactions up to Rs 2,000. RuPay-powered debit card payments will also remain protected from such charges.
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The proposed fee is expected to apply to person-to-merchant (P2M) payments rather than transfers between individuals.
Under the structure being discussed, a Rs 5,000 merchant payment at 0.4% would attract a Rs 20 fee, while a Rs 10,000 payment would carry a Rs 40 fee. These are illustrative calculations, as the final rate is still under consultation.
The proposed revenue could also be divided across the payments ecosystem. One structure under consideration would give 40% to banks, with payment apps and payment aggregators receiving 30% each. This distribution has not been finalised.
The potential change follows Parliament's recent amendment to the Payment and Settlement Systems Act, which removed the earlier legal restriction on imposing a Merchant Discount Rate (MDR) on notified digital payment modes. The amendment itself did not introduce a UPI fee.
The scale of UPI makes the proposed shift significant. The platform processed 24.51 billion transactions worth Rs 29.82 lakh crore in August, according to Reuters.
Also Read | No Direct, Indirect Charges On UPI Payments Up To Rs 2,000, Govt Clarifies
Jefferies estimates that fees on larger merchant transactions could generate Rs 5,000 crore to Rs 10,000 crore annually for the payments industry.
For now, UPI payments up to Rs 2,000 remain free. NPCI, banks and payment companies will need to finalise whether larger merchant transactions will attract MDR, along with the rate and how the resulting revenue will be distributed.
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