GUIDES
GuidesMoney MattersA Guide: 1.1% charge on UPI transactions above ₹2000. Here’s what you need to know.
LAST EDITED BY PRANAV KARNAD ON JUNE 17, 2025.
1.1% charge on UPI transactions above ₹2000. Here’s what you need to know.
The NPCI or the National Payments Corporation of India announced that there will be a 1.1% charge on UPI transactions from April 1st, 2023. But first things first, these charges do not apply to customers, they only apply to merchants. Meaning that you will not need to pay an extra fee to receive or send money through UPI .
From April 1, 2023, any merchant transactions over ₹2,000 that are conducted through Prepaid Payment Instrument Wallets (PPI Wallets) on UPI will incur an interchange charge of 1.1%. This decision was made by the National Payments Corporation of India (NPCI), which governs UPI.
So, on a transaction amount of ₹2,500 the merchant receiving this money will pay a fee of ₹27.5. But the merchant will not be charged if it’s a bank-to-bank transfer through UPI. These charges only apply if the money has been sent from a pre-paid wallet like a PayTM wallet or PhonePe wallet, where you add money beforehand to make faster payments.
No. It's important to note that there will not be a fee for regular UPI transactions. Interchange fees are typically associated with card payments, as they help to cover the cost of transactions.
According to a statement from the NCPI, the recent regulatory guidelines have allowed PPI Wallets to become part of the interoperable UPI ecosystem.
NPCI clarified that the newly introduced interchange charges will only be applied to PPI merchant transactions and not to customers. Additionally, NPCI confirmed that there will be no charge for regular UPI payments that are conducted between bank accounts.
This development could bring forth new opportunities for growth, innovation, and competition. By increasing interoperability among payment systems, consumers will have more options and flexibility while transacting with merchants. This could result in a greater adoption of digital payments, promoting financial inclusion and economic development.
The Regulatory Authority on 4 September 2023 announced an extension of the UPI's capabilities by allowing pre-sanctioned credit lines from Scheduled Commercial Banks to be used as funding accounts for transactions conducted through the UPI system.
With prior consent, individuals can now make payments via the UPI System using a pre-approved credit line from a Scheduled Commercial Bank.
The potential for innovation in the digital payments space, competition, and enhancement of services offered to consumers was also noted. Overall, there was optimism expressed about the positive impact this development could have on the Indian economy and banking system. A commitment was made to continue supporting the growth and advancement of digital payments in India.
Check out this short for another new update on UPI payments: https://www.youtube.com/shorts/uy-TBVkiHJ4
No. This 1.1% charge will only be levied on merchants, i.e. businesses. And they will only be charged if the customer makes the payment from a UPI ID that is connected to a pre-paid instrument like a wallet.
No. The Finance Minister, Nirmala Sitharaman, said in her budget presentation of 2023 that there will not be any charges for making UPI payments. The Indian government views the UPI a ‘public good’ or a public resource that should not be monetised.
This is an interchange fee that merchants will have to pay, to cover the transaction cost. Transaction cost involves the maintenance of banking infrastructure necessary to make UPI payments seamless and round-the-clock.
No. There are no charges for sending money directly to another person. This 1.1% charge only applies to businesses if the money is sent using a pre-paid wallet.
