UPI gets a 0.4% fee on 15 October. Here is who actually pays it.
From 15 October, merchants pay 0.4% on UPI payments above ₹2,000. You pay nothing and apps cannot add a platform fee. Credit on UPI is left out because it already costs merchants far more, and that is the part that decides what your RuPay card earns.
In this article
From 15 October, a merchant receiving a UPI payment above ₹2,000 from your bank account will pay 0.4% of it, up to ₹300. Until now that payment cost the merchant nothing.
Most coverage has written this up as a charge on you. It is not one. The government's own FAQ on the change says so four separate ways, and it bans the two routes by which the fee could reach you directly.
The more useful detail sits in one answer near the end. One kind of UPI payment is left out of the new fee entirely: credit. If you pay with a RuPay credit card on UPI, the new rule does not touch you, and the reason why says a lot about what your card earns there.
What changes on 15 October
The Department of Financial Services published 42 questions and answers on 15 September, the same day NPCI issued its circular. The rates are these:
| Payment to a merchant | What the merchant pays |
|---|---|
| Up to ₹2,000 | Nothing |
| Above ₹2,000 | 0.4% |
| ₹75,000 and above | ₹300, the cap |
| Fuel, railways, telecom, insurance, utilities, above ₹2,000 | ₹5 flat |
| Mutual funds and stockbrokers | 0.02%, capped at ₹300 |
A lot sits outside the fee altogether. Sending money to a person, or between your own accounts, stays free at any amount. So do AutoPay mandates, which covers SIPs, OTT subscriptions and recurring bills. Small shops collecting up to ₹1 lakh a month on a QR code into a personal account stay at zero, even on a single payment above ₹2,000. They move into the paying category only after three consecutive months above ₹1 lakh.
The ₹2,000 line alone exempts most merchant payments. The FAQ says payments up to ₹2,000 make up more than 95% of merchant UPI volume.
Why none of it lands on you
UPI stays free for the person paying. UPI apps "shall NOT charge Platform Fee or any other charge for any payment made through UPI". And merchants "cannot pass on MDR charges to customers while accepting payments through UPI".
That closes the direct routes on paper. In practice, a grocery store owner in the National Capital Region told Al Jazeera the store has already started adding a flat ₹5 to every payment above ₹1,000. From 15 October a shop doing that is breaking the rule, and you can say so. The FAQ does not say how the rule will be enforced, so saying so is, for now, most of what you can do.
It does not close the indirect route, and here the FAQ makes a claim rather than stating a rule. It says merchants will absorb the cost and "shopkeepers have no economic incentive to inflate retail shelf prices". The same store owner disagrees: "If the government charges us, we increase costs for customers. It's simple maths." The Retailers Association of India's chief executive called the fee a cut against the government's own formalisation agenda.
Nobody can stop a shop from pricing its costs into the shelf. At 0.4%, on only the larger bills, the pressure to do it is small.
The payment the new fee leaves out
Question 36 asks whether the fee applies to credit cards linked on UPI. The answer is that "RuPay Credit Cards linked to UPI or pre-sanctioned bank credit lines, operate under separate credit product rules". The 0.4% covers only money moving from your bank account to a merchant's.
Credit on UPI is left out because merchants already pay for it. When RuPay credit cards came to UPI in 2022, NPCI set nil charges only for small merchants on payments up to ₹2,000, and existing card interchange on payments above it. Acquiring banks pass that cost on to merchants. Canara Bank, for one, publishes its schedule, effective from 1 June 2026, for RuPay credit card payments above ₹2,000:
| Merchant category | Canara's MDR |
|---|---|
| Public sector insurance | 0.50% |
| Railways, telecom, insurance, education, government | 0.70% |
| Fuel | 0.75% |
| Supermarkets, convenience stores | 1.10% |
| Everything else | 1.75% |
Canara calls these indicative, before 18% GST, with the final rate set by the merchant's category code. Another acquiring bank may charge differently. The "new UPI charge" everyone is writing about is a quarter of what a RuPay credit card on UPI already costs an ordinary shop.
Put one ₹5,000 purchase at an ordinary shop through each route after 15 October:
| How you pay | What an ordinary shop pays on ₹5,000 |
|---|---|
| UPI from your bank account | ₹20 |
| RuPay credit card on UPI | ₹87.50 plus GST, at Canara's rate |
| Credit card, swiped | ₹75 to ₹125, at the FAQ's 1.5% to 2.5% |
That gap is why a shop can happily take UPI and still refuse a credit card on UPI. Before 15 October the difference on this bill is ₹87.50. After, it is ₹67.50. The gap narrows. It does not close, so do not expect the "no credit card" sign to come down.
Why the ₹2,000 line matters for your rewards
In August 2024 NPCI told RuPay issuers that rewards on UPI could no longer be worse than on the card itself. The circular took effect on 1 September 2024 and reads:
Issuers shall ensure that reward points, benefits, features, and other ancillary offers should not be lower (directly & indirectly) for RuPay Credit Cards on UPI transactions and RuPay credit cards, except for transactions where issuer does not earn any interchange fee.
The exception is where your rewards live. NPCI's own rule for RuPay credit cards on UPI is "Nil MDR (no interchange, PSP & app provider charges)" for small offline merchants, those with turnover up to ₹20 lakh a year, on payments up to ₹2,000. There the issuer earns nothing to share with you, and that is exactly the case the parity rule leaves out.
So the ₹2,000 line appears twice, in two different frameworks, and it does two different things. Above it, a RuPay card on UPI earns the full card rate by rule, and the merchant is paying for it. Below it, at a small shop, your issuer is allowed to pay you less on UPI than on a swipe. Small payments are already where issuers draw lines: the RuPay variant of Scapia's Axis card, the one that works on UPI, earns nothing at all below ₹500.
Key takeaway
Above ₹2,000 at a merchant, a RuPay credit card on UPI must earn what the card earns anywhere else, and costs you nothing extra. Below ₹2,000 at a small shop, that guarantee does not apply. Check your card's terms for UPI before assuming a small payment earns.
The politics, briefly
On 12 June 2025 the Finance Ministry called claims that MDR would be charged on UPI transactions "completely false". Fifteen months later, merchants will pay it on the larger ones.
The government's case is cost. The FAQ cites industry estimates that running UPI costs around ₹20,000 crore a year, and says subsidies were meant as bridge funding. UPI handled 2,451 crore transactions worth ₹29.9 lakh crore in August alone.
The opposition has alleged the fee answers pressure from the United States, whose trade representative's 2026 report complained that American payment companies cannot compete on UPI on equal terms with RuPay. The Finance Ministry called that "patently false and misleading" on 17 September, and pointed out that the circular still allows no credit card other than RuPay on UPI.
Worth knowing
Every rate, threshold and exemption here comes from the Department of Financial Services FAQ of 15 September 2026, linked below. Canara Bank's RuPay credit card schedule is one acquiring bank's indicative rates, not an NPCI rate card.
What to do
- Below ₹2,000, between people, and on AutoPay, nothing changes. Keep paying the way you do.
- If a shop adds a charge for paying by UPI, tell them it is not allowed. The FAQ says merchants cannot pass the fee on.
- Above ₹2,000, if you hold a RuPay credit card, paying it on UPI earns the full card rate, where your bank account usually earns nothing.
- For small payments at small shops, read what your card pays on UPI before relying on it. Issuers are allowed to pay less there.
- Expect shops that refuse credit on UPI to keep refusing. The cost gap that makes them do it is still more than ₹60 on a ₹5,000 bill.
Common questions
Will I be charged for using UPI from 15 October?
No. The fee is paid by the merchant, UPI apps are barred from adding a platform fee, and merchants are barred from passing the fee on.
Are my SIPs and subscriptions affected?
No. AutoPay mandates carry no fee. A one-time UPI payment to a mutual fund or broker carries 0.02%, capped at ₹300, and the fund house or broker pays it.
Can I use a Visa or Mastercard credit card on UPI now?
No. RuPay remains the only credit card allowed on UPI.
Sources
- Department of Financial Services, FAQs on MDR on select UPI (P2M) transactions, 15 September 2026 (PDF), for every rate, cap, threshold and exemption, the consumer protections, the credit carve-out, and the volume and cost figures
- Canara Bank, MDR on RuPay credit card on UPI payments (PDF), for the category rates from 1 June 2026
- Business Standard, 7 August 2024, for the NPCI rewards parity circular
- Inc42, 4 October 2022, for NPCI's nil charge rule for small merchants on RuPay credit card payments up to ₹2,000
- ThePrint, 17 September 2026, for the Finance Ministry's response on US pressure and RuPay exclusivity
- Al Jazeera, 17 September 2026, for the store owner's surcharge and the merchant and retailer reactions
- All India Radio News, 12 June 2025, for the Finance Ministry's earlier denial
Checked against the DFS FAQ on 18 September 2026.
Figures here were checked against issuer and primary sources on 18 September 2026. Card terms and offer periods change without notice, and this is general information rather than advice about your particular situation.
