India Opens UPI to 0.25-0.4% Fees as It Targets 1 Billion Users by 2030
Updated
Updated · Financial Times · Aug 11
India Opens UPI to 0.25-0.4% Fees as It Targets 1 Billion Users by 2030
3 articles · Updated · Financial Times · Aug 11
Summary
A legal amendment has removed the bar on charging fees on UPI and other notified digital payment modes, with a future notification expected to set terms for merchant charges on transactions above ₹2,000.
Banks and payment firms had pushed for fees because the current zero-MDR model leaves them carrying most infrastructure and cybersecurity costs; the budget set aside ₹20 billion, which analysts say covers less than 15% of annual needs.
UPI processed 241.6 billion transactions in the last financial year and has grown nearly 12,000-fold since its first full year, making its free-to-use model central to adoption even as person-to-person payments are set to remain free.
The Reserve Bank has signaled both support and caution: Governor Sanjay Malhotra said someone must pay for the system, while the RBI still wants digital payments to stay accessible as UPI tries to grow from 555 million users to 1 billion by 2030.
The shift also comes after a March 2026 U.S. trade report called India’s free digital-payments policy a trade barrier disadvantaging Visa and Mastercard, adding a trade angle as New Delhi and Washington pursue a broader deal.
Will India's move to charge large merchants for UPI quietly force everyday consumers to foot the bill?
As UPI expands globally, is the new merchant fee a necessary survival tactic or a digital monopoly's cash grab?
India's 2026 UPI Policy Shift: Why the Zero-MDR Era Is Ending and What It Means for Merchants, Consumers, and Digital Payments
Overview
In August 2026, India removed the statutory zero-charge rule for UPI and RuPay payments, giving the government new flexibility to set or adjust merchant fees through executive notifications. This change was driven by the rapid growth of UPI, which created high infrastructure costs that banks and payment providers could no longer sustain without more revenue. The new framework protects everyday users and small merchants by keeping most transactions free, while only large business payments above ₹2,000 may face a small fee in the future. This approach aims to ensure UPI’s long-term sustainability, encourage competition, and support ongoing investment in secure, innovative payment systems.