A 0.4% fee on payments above ₹2,000 made to merchants over the Unified Payments Interface, India's instant-payments network, starts on 15 October after the Supreme Court declined to suspend it; banks are to receive half of every rupee collected, government sources have said.
National Payments Corp. of India, or NPCI, which runs the network, set the fee on 15 September, a day after a finance-ministry notification cleared the way, and an advocate, Anjan Datta, challenged both in the Supreme Court the next day, Business Standard reported. The fee, the first on UPI in six years, is capped at ₹300 a payment, a ceiling reached at ₹75,000. It does not apply to payments between people, to payments of ₹2,000 or less, or to small merchants receiving up to ₹1 lakh a month through UPI codes; railways, telecom, insurance, fuel and farm inputs pay a flat ₹5.
The fee is meant to recover ₹13,000 crore to ₹15,000 crore in its first year, against about ₹21,000 crore a year that the system costs to run, NPCI's chief executive, Dilip Asbe, said on 24 September, the Economic Times reported. About four-fifths of it will come from businesses collecting more than ₹1,000 crore a year, which already accept credit cards at 1.5% to 2.5%, he said; 96% of payments and 75% of their value fall outside the fee.
Half goes to banks. Mint reported the split, citing PTI and government sources; set against NPCI's first-year aim it comes to these sums.
| Receiver | Share of the fee | On NPCI's first-year aim, ₹ crore |
|---|---|---|
| The paying customer's bank | 40% | 5,200 to 6,000 |
| The merchant's payment gateway | 30% | 3,900 to 4,500 |
| The UPI app | 20% | 2,600 to 3,000 |
| The bank that sponsors the app | 10% | 1,300 to 1,500 |
Kiwaro's arithmetic on two reported figures, before the 5% of collections that NPCI will set aside for a fund for small merchants. The split has not been published as a rule.
State Bank of India will recover its costs and could make a surplus, a senior bank official said, according to the Economic Times. One 97 Communications, which runs the Paytm app, earned ₹703 crore before tax on ₹8,967 crore of revenue in the four quarters to June.
On NPCI's own figures the fee will average about half its headline rate. Merchant payments in its scope exceed ₹6 lakh crore a month, Business Standard reported, citing NPCI data; 0.4% of a year of that is about ₹29,000 crore, twice what NPCI aims to recover. The ₹300 cap and the flat ₹5 categories are among the reasons.
What a merchant pays depends on the size of its bills. A ₹1,500 grocery bill carries no fee. A ₹50,000 phone carries ₹200. A ₹10 lakh car carries ₹300, or 0.03%. The full 0.4% applies above ₹2,000 and up to ₹75,000.
Against a thin margin even 0.4% is large. A company that keeps 5 paise of operating profit on a rupee of sales would give up 8% of that profit if every rupee paid the full fee. The table gives that upper limit for the 17 listed companies with revenue above ₹5,000 crore that sell to consumers from shops, restaurants, cinemas, hotels and aircraft. It shows how thin each margin is against the charge, not how much of the charge each will bear: a chain whose bills are mostly ₹2,000 or less, or above ₹75,000, or paid by card or cash, pays far less than its row.
| Company, four quarters to June 2026 | Revenue, ₹ crore | Operating margin | Upper limit: 0.4% of all sales as share of operating profit |
|---|---|---|---|
| InterGlobe Aviation | 89,050 | 3.8% | 10.6% |
| Devyani International | 5,835 | 4.5% | 8.8% |
| Shoppers Stop | 5,174 | 5.0% | 8.0% |
| Electronics Mart India | 7,863 | 5.3% | 7.6% |
| Medplus Health Services | 7,229 | 5.4% | 7.4% |
| Kalyan Jewellers | 39,063 | 6.1% | 6.5% |
| Avenue Supermarts | 71,256 | 6.1% | 6.5% |
| Thangamayil Jewellery | 9,606 | 6.2% | 6.5% |
| Aditya Birla Lifestyle Brands | 8,601 | 7.5% | 5.4% |
| Titan | 92,417 | 9.9% | 4.1% |
| Vishal Mega Mart | 13,493 | 10.2% | 3.9% |
| Senco Gold | 9,660 | 10.2% | 3.9% |
| Jubilant FoodWorks | 9,846 | 10.3% | 3.9% |
| Trent | 20,945 | 12.3% | 3.2% |
| PVR Inox | 6,872 | 16.2% | 2.5% |
| Indian Hotels | 9,987 | 29.7% | 1.3% |
| Aditya Birla Fashion and Retail | 8,371 | operating loss | not measurable |
The fee's legal footing is open. A bench led by Chief Justice Surya Kant refused on 28 September to stay it but asked the government to explain on affidavit, a sworn written statement, what the charge is. "We would have understood if it was a fee. It's not a fee, then what is the character?" the bench asked, Mint reported. Additional Solicitor General N. Venkataraman called it "a settlement fee amongst the players" and told the court: "The government is not taking a rupee of this." The court sent notice to the government, the Reserve Bank of India and NPCI.
The fee attracts 18% goods and services tax, which lifts the cost to 0.472% for a merchant that cannot claim the tax back. Government sources told the Economic Times they hoped the GST Council, which meets on 7 October, would take a view, and also that the meeting would not take up rate changes.
Payments into broking and mutual-fund accounts carry a lower rate of 0.02%, also capped at ₹300. Brokers object that money moved into a trading account may never produce a trade: "there is no guarantee that money transferred to a broker will actually result in a transaction," Zerodha founder Nithin Kamath wrote, the Economic Times reported. "We will certainly look into it," Tuhin Kanta Pandey, chairman of the Securities and Exchange Board of India, said on 17 September.
Two trade bodies, of consumer-goods distributors and mobile-phone retailers, withdrew from a "No UPI Day" called for 2 October after meeting Finance Minister Nirmala Sitharaman. Their delegation asked that the fee be deferred past the festive season, that the small-merchant threshold be raised from ₹1 lakh to ₹5 lakh and that payments between merchants be exempt, Business Standard reported on 30 September.
| Date | Development |
|---|---|
| 30 September | Two trade bodies withdraw from the 2 October protest after meeting the finance minister |
| 28 September | Supreme Court declines a stay and asks the government for an affidavit |
| 24 September | NPCI's chief gives the first-year aim and says four-fifths will come from large merchants |
| 16 September | Petition filed in the Supreme Court |
| 15 September | NPCI sets the fee: 0.4% above ₹2,000, capped at ₹300, from 15 October |
| 14 September | Finance-ministry notification clears the way for charges on UPI |
The story so far, newest first. Sources: Business Standard, the Economic Times, Mint.
Still, nothing yet shows how payers will respond. The fee starts on 15 October; September's 80.2 crore payments a day, the most on record, came before it, Business Standard reported. The month's total of 2,407 crore payments was 1.8% below August's because September is a day shorter.
What to watch
| Date | What happens |
|---|---|
| 7 October | the GST Council meets. |
| 15 October | the fee takes effect. |
| 15 December | the date by which the rules of the small-merchant fund are due, three months after NPCI's notice. |
Data note: Revenue and operating profit are from filed results, on group accounts where filed; operating profit is total income less total expenses, plus finance costs. The upper limit assumes every rupee of revenue is a UPI payment above ₹2,000 and up to ₹75,000, which is true of no company, and Kiwaro does not hold any company's mix of bill sizes or payment methods. Left out of the table are online platforms, vehicle makers and dealers, hospitals and companies with revenue below ₹5,000 crore; UPI volumes and the fee's terms are as reported by the outlets named.
