Transactions at or below the ₹2,000 threshold will remain free for merchants, and NPCI confirmed that the service will continue to be free for consumers.
The policy shift addresses the rising costs of maintaining India’s primary digital payments infrastructure, which processed over 24 billion transactions in August alone.
According to NPCI, the annual expense of managing server capacity, cybersecurity, and fraud prevention has reached an estimated ₹200 billion ($2.1 billion).
By introducing these charges, authorities aim to reduce the government's reliance on subsidies to fund the system.
Even with the new fee, UPI remains a more affordable alternative for businesses compared to traditional credit cards, which typically carry fees between 1.5% and 2.5%.
This change primarily impacts businesses handling larger sales, though NPCI has implemented safeguards to protect smaller players, such as exempting merchants who receive less than ₹100,000 monthly.
The resulting revenue will be distributed among banks and fintech companies like PhonePe, Paytm, and Razorpay to support further infrastructure investments and expansion into rural areas.
While merchants are prohibited from passing these costs directly to consumers, the industry is watching to see if businesses will continue to prioritize UPI for high-value purchases now that the zero-fee era has ended.