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The Reserve Bank of India has given its support to a new fee on select high-value UPI transactions. The central bank said the move will help India's digital payments system grow in a steady and lasting way.
From 15th October, a 0.4% Merchant Discount Rate will apply to person-to-merchant UPI payments above Rs 2,000. This charge will not fall on merchants. It will be shared within the payments ecosystem itself, among banks, payment service providers, and UPI app providers.
For payments of Rs 75,000 or more, the fee will be capped at Rs 300. Some sectors will follow different rates. Railways, telecom, insurance, fuel, and farm input payments above Rs 2,000 will carry a flat charge of Rs 5. Mutual funds, securities, and stockbroking payments will see a lower rate of 0.02%, also capped at Rs 300.
The government expects about 96% of merchant transactions to stay untouched by this change. Person-to-person transfers will remain free at any amount. Small merchant payments already under the zero-fee rule will also stay free, along with merchant payments up to Rs 2,000.
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The RBI believes this fee will give UPI the funds needed to keep investing in technology and infrastructure. Officials say this support will help the payment system expand further and bring in new features over time.
This change follows updates to the Payment and Settlement Systems Act, 2007, which created a legal path for adding such fees to UPI and other digital payment modes. NPCI has set 15th October as the date for banks, fintech firms, and payment platforms to update their systems and follow the new structure.
For years, UPI ran on a zero-fee model for merchants. This shift marks a change in that approach, even as everyday users continue to enjoy free transactions. The new fee structure aims to strike a balance. It wants to keep UPI free for common people while giving the ecosystem a way to fund its own growth.
