India Consults Banks on Fees for Large UPI Payments, Sources Say
India consults banks and payment firms on potential fees for large UPI transactions, while keeping payments up to ₹2,000 free and exploring a sustainable merchant-side revenue model for digital payments.
India is discussing with the banks and other payment providers about the possible fee structure in case of high-value transactions on the Unified Payments Interface platform. These negotiations come amid the recent developments that provide a legal framework for the imposition of fees on UPI transactions exceeding ₹2,000.
As per reports, the new model may lead to a merchant fee of 0.4 per cent on P2M UPI payments above Rs 2,000. Nevertheless, the figure as well as the structure of the fee is still under debate. Free transfers for P2P payments are projected. In other words, money transfers between people will not be subject to an extra fee.
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The government has already made it clear that UPI transactions up to ₹2,000 would remain free of charge. The notification has also made sure that transactions through RuPay cards would not be charged. It is clear now that the government is setting a benchmark at which digital transactions can still be considered free, but leaving room for future MDR on transactions above that benchmark.
Also, in the proposed system, there are going to be deliberations regarding the manner through which any income derived from such charges is going to be divided among the banks, payment apps, and payment aggregators. It is reported that one of the proposals being considered sees around 40 per cent of the fee going to the banks.
This development in the context of levying fees happens at a time when the UPI platform deals with a huge number of payments. As of August 2026, the platform facilitates 24 billion transactions valued at $311 billion. With a strategic imposition of fees on some transactions, the payment industry could earn anywhere between ₹5,000-10,000 crore per year, reports Reuters.
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The consultations are intended to clarify the application of the proposed fees to various categories of merchants and transactions. The government is trying to ensure that the small payments remain free for use while ensuring a revenue model for banks, fintech companies and payment network operators in the Indian UPI system.
