India is postponing a planned fee on some UPI merchant payments after retailers and petrol pump operators objected. On Tuesday, the National Payments Corporation of India (NPCI), which runs the Unified Payments Interface, said the 0.4% charge on eligible merchant transactions above ₹2,000 (about $21) would not start as planned on October 15. Announced last month, the fee would mark a significant departure from India’s years-long policy of letting merchants accept UPI payments for free.
NPCI attributed the postponement to the festive shopping season. The charge is now due to take effect after Diwali, one of India’s largest festivals and shopping periods, but NPCI has not set a new date.
Some retailers and petrol pump operators warned they might stop taking UPI payments if the fee went ahead. The proposal comes as banks and payment companies seek to recover the costs of running the system, while merchants have so far paid nothing to accept UPI payments.
UPI underpins India’s digital payments system, processing payments through Google Pay, PhonePe, and Paytm. Its growth has been helped by the government’s decision to keep merchant payments free and by subsidies for banks and payment providers to help them cover some of their costs. NPCI said UPI handled 24.07 billion transactions worth ₹29.37 trillion (about $305 billion) in September alone.
Merchants once paid fees for UPI transactions. Banks and payment providers charged them until the government removed those fees in January 2020, aiming to move people away from cash, which had long been the country’s main way to pay for goods and services. UPI has since grown in both transaction volume and value.
The proposed exemptions cover payments of ₹2,000 or less and small merchants that receive less than ₹100,000 (about $1,033) per month through UPI. For larger transactions, NPCI set a maximum fee of ₹300 (around $3). NPCI said the revenue would be shared among UPI ecosystem participants to support infrastructure, cybersecurity, and fraud prevention.
Last month, NPCI cited industry estimates that put UPI’s annual operating costs at about ₹200 billion (around $2.1 billion), covering server capacity, fraud prevention, and technical support. Banks and payment companies have argued for years that they need a way to recoup these expenses as transaction volumes increase.
The government has also pursued UPI’s expansion overseas. NPCI established its international arm in April 2020, and the network is available in several countries, including Singapore, the United Arab Emirates, and France.
