India to introduce UPI merchant fee above $20, ending free acceptance for many payments

India’s National Payments Corporation of India (NPCI) says merchants will face a 0.4% fee for accepting UPI payments above 2,000 rupees ($20.84) starting next month. Person-to-person UPI transfers will remain free.

NPCI sets the fee thresholds for merchants

NPCI announced a 0.4% charge for merchant payments made through UPI above 2,000 rupees. For transactions above 75,000 rupees, the fee will be capped at 300 rupees per transaction.

NPCI also said person-to-person UPI transactions will remain free.

Government defends change amid cashless push

The government previously promoted UPI with free services for broad adoption. In 2020, it cut the merchant discount rate for UPI to zero to encourage digital payments. After that, UPI transaction value rose to 213 trillion rupees over roughly six years ending January 2025.

The World Bank described UPI earlier this year as making digital payments feel like cash for users due to instant settlement and free use at the point of payment. The new merchant fee is now expected to shift that model.

Fintech support and political criticism follow

Fintech firms welcomed the fee. Girish Krishnan, director of payment experience at Amazon Pay, said the MDR framework preserves “zero-cost adoption” for consumers, small shopkeepers, and micro-enterprises. Kunal Shah, head of Meta’s WhatsApp Pay, called it a “great move forward,” and Paytm said it would generate additional revenue from merchant business.

Critics argue the fee amounts to a tax on UPI usage. Ashneer Grover, former CEO of BharatPe, said “any levy on UPI is just tax collection.” The Indian National Congress accused the government of favoring U.S. firms and alleged money would be taken from Indian users to support companies such as PhonePe, Google Pay, and Amazon. Some commentators also said the fee could push users back toward cash.

UPI volume scale and U.S. trade concerns

UPI processes more than 1.1 million transactions every two minutes on average, according to NPCI data for September. In January, the government said UPI surpassed Visa on daily transaction volumes, accounting for 85% of digital payments in India and 50% globally.

The change comes after concerns raised earlier this year by the U.S. Trade Representative. The report said India’s electronic payment policies appear to favor domestic suppliers over foreign ones and that U.S. electronic payment services suppliers could not participate in the Indian ecosystem, including credit transactions on UPI and domestic card network RuPay.

Why this matters

A fee on merchant acceptance above 2,000 rupees will change UPI’s economics for retailers at the margin, even as person-to-person transfers stay free. The policy also intensifies scrutiny of how India balances cashless scale, platform unit economics, and cross-border participation in payments.