PhonePe and Razorpay back merchant UPI fees
Could selective charges fund UPI without ending free consumer payments?
Overview
PhonePe and ’s support for reflects a broader fight over who should pay to keep India’s fast-growing running. The has driven mass adoption, but payments firms argue that large merchants should absorb a modest charge to help fund , and without changing the free experience for consumers and small payments.
Timeline
Government keeps final details open
The passed the , removing the legal bar on for , but the amendment did not itself impose any charge. Reporting said no rate or turnover threshold had been finalized yet, leaving the next step to the ’s policy decision.
PhonePe and Razorpay publicly back selective charges
and executives backed merchant charges for larger businesses while saying UPI should stay free for consumers. Their support added weight to the industry case that selective could improve long-term economics without harming the .
Merchant cost pressure already surfaces in payments chain
Separate reporting showed beginning to charge for processing , even though end users were not being charged directly. The move highlighted how costs can already appear inside the , reinforcing the broader debate over who pays to keep UPI running.
Selective MDR seen as sustainable funding
Supporters of the proposal argued that large merchants are better able to absorb a modest than small businesses or individual users. The policy logic was that selective merchant funding could support ’s , , and without changing the free consumer experience.
Consumer and small-merchant protection is emphasized
Officials and industry reporting stressed that , along with payments to , would remain outside the charging plan. This distinction was central to limiting political backlash and preserving the low-cost everyday use case that made UPI dominant.
Payments Council backs selective charges
The and allied industry voices supported charges on larger merchants while keeping consumer UPI free. Their argument was that selective could help fund the payments rail without undermining the mass adoption that zero-fee consumer UPI created.
Threshold-based fee model emerges
Reporting said the draft policy could levy a small fee, around 5 to 7 , on businesses with annual of about ₹1 crore to ₹1.5 crore or more. That framing made the debate about targeting larger commercial users rather than reversing zero-fee UPI for everyday consumers.
Government reopens MDR discussion
The government entered the final stages of considering charges for large merchants on UPI, according to reporting cited in the latest coverage. The proposed shape was selective, not universal, with and small merchant payments still intended to remain free.
Industry pressure builds for a funding rethink
As UPI volumes kept rising, payments companies and merchant platforms increasingly argued that someone had to pay for , security, , and product innovation. Razorpay’s published explanations framed the issue as a split between free bank-to-bank UPI and separately charged , reflecting the business case behind selective merchant pricing.
Zero-MDR UPI policy takes effect
India’s UPI system was placed under a , making payments free for users and merchants. Razorpay and PhonePe’s own materials later described standard bank-account UPI as carrying 0% MDR, which set the baseline for the current debate over who should fund the network.