Starting October 15, India will introduce a 0.4% merchant discount rate (MDR) for UPI transactions exceeding ₹2,000, which is approximately $21. This fee applies to merchants, while person-to-person transfers will remain free of charge. The government stated that the revenue will support banks and payment providers to ensure the system's sustainability and expansion.
The UPI system currently serves over 550 million users. Last month, it processed 24.5 billion transactions totaling ₹29,823 billion. UPI accounts for 84% of India’s digital payment volume and 49% of global real-time payment volume. PhonePe and Google Pay collectively hold about 80% of the market share by transaction value.
The National Payments Corporation of India, which operates the platform, has prohibited merchants from passing these fees to consumers. However, critics express concerns that merchants might stop accepting UPI payments above the ₹2,000 threshold or shift customers toward cash transactions to avoid the new costs.
The zero-fee policy for UPI has been in effect since 2020. Previously, the Indian Finance Ministry had denied rumors regarding the introduction of such fees. The government maintains that the new MDR structure is necessary to promote digital payment infrastructure development in rural and semi-urban regions.
