India debates merchant fees for its widely used UPI payment system
The Indian government is weighing the introduction of a modest fee on larger UPI transactions for merchants, while keeping person-to-person payments free.
India is preparing legislation that would allow banks and payment companies to levy a modest merchant discount rate on UPI transactions above a set amount, targeting larger businesses while preserving free person-to-person transfers. The proposal is intended to create a new revenue stream for the financial ecosystem that underpins the world’s largest real-time payment network. Researchers note that merchant participation has been a key driver of UPI’s rapid growth, and that fees on small or informal sellers could slow further expansion.
By focusing on high-value payments that represent a minority of transaction count but a majority of value, the government hopes to balance sustainability with broad accessibility. Central bank governor Sanjay Malhotra has emphasized that the system’s operating costs must eventually be covered. The outcome will test whether pricing can be introduced without undermining the network effects that have made UPI ubiquitous across India and beyond.
Why it matters
Introducing fees could change how Indian merchants and consumers use the country's dominant digital payment network.
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