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1Scan for outdated or missing drivers - takes under a minute2Repair Windows errors before they cause bigger problems3Fix the driver behind crashes, sound loss and screen glitchesWho pays UPI merchant fees? For a standard UPI payment from a linked bank account, neither the customer nor the merchant pays a transaction charge under the policy described by the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI). But “UPI” can also mean a payment funded by a prepaid wallet or a RuPay credit card, and those arrangements have different rules. The source of funds, merchant category, transaction amount and merchant’s own acceptance agreement all matter.
Is UPI free for merchants and customers?
For bank-account-to-bank-account UPI payments, NPCI said on 29 March 2023 that transactions continued to be free for both customers and merchants. Its institutional statement said: “These Bank account-to-account transactions continue to remain free for Customers and Merchants.” The RBI links the no-charge framework for prescribed electronic payment modes, including UPI, to Section 10A of the Payment and Settlement Systems Act, effective 1 January 2020. The rule concerns charges for the prescribed payment transaction; it does not establish that every optional service a merchant might contract for is free.
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One reason the question causes confusion is that “UPI fee” can refer to several different things:
- Payer fee: an amount charged to the person making the payment.
- Merchant discount rate (MDR): a merchant-side processing charge. The RBI describes the policy direction that no MDR be collected for UPI and RuPay debit-card transactions from 1 January 2020.
- Interchange: a charge between participants in a payment arrangement. It is not automatically a fee paid by the customer.
- Separately contracted service: a charge for an optional merchant service or provider arrangement, whose terms depend on the merchant’s contract.
These terms are not interchangeable. A customer-facing charge, a merchant processing charge and an ecosystem interchange can relate to the same payment system while having different payers and contractual bases. Seeing the word “interchange” does not establish that the customer owes a fee, just as a merchant’s charge for an optional service does not establish a universal UPI MDR.
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NPCI’s 2023 statement describes bank-account UPI as free for customers and merchants. It does not establish that all acquiring, software, device, rental or other optional merchant services carry no cost. Treat a line item for such a service according to the merchant’s agreement rather than assuming it is UPI MDR. The available sources do not give one current rate that applies to every acquiring bank or payment aggregator.
How the payment source changes the fee treatment
Do not assume all UPI payments have identical pricing. The relevant first question is how the payment is funded. A payment made through a UPI app can draw from a linked bank account, a prepaid payment instrument (PPI) wallet or a RuPay credit card linked to UPI. The app or QR flow alone does not identify which pricing arrangement applies.
| Payment source | What the cited rules say | What to check |
|---|---|---|
| Linked bank account | NPCI said bank-account-to-bank-account UPI transactions remained free for customers and merchants. The RBI’s prescribed-mode no-charge framework took effect on 1 January 2020. | Whether a merchant charge is actually for a separately contracted service rather than the UPI transaction itself. |
| PPI wallet on UPI | NPCI says interchange applies to PPI merchant transactions under the announced arrangement and that the customer/PPI holder pays no charge for the UPI transaction. | Whether the payment used a PPI wallet; do not mistake participant-to-participant interchange for a customer fee. |
| RuPay credit card linked to UPI | NPCI’s operating circular sets out a separate interchange and ecosystem-charge arrangement. It specifies nil MDR for small offline merchants on transactions up to ₹2,000 under the stated classification. | The merchant’s category, whether it is classified as a small offline merchant, the transaction amount and the acquiring agreement. |
PPI wallets: interchange is not the customer’s charge
Prepaid payment instrument (PPI) wallets linked to UPI are a distinct case from payments drawn directly from a bank account. NPCI’s stated arrangement applies interchange to PPI merchant transactions, while its FAQ says there are no charges to the customer or PPI holder for UPI transactions in this context. NPCI’s FAQ wording is specifically about PPI-on-UPI: “There are no charges to be paid by the customer/ PPI holder for UPI transactions.” Keep that context clear. Interchange is an ecosystem-level charge between participants; it should not be described as a fee the customer necessarily pays.
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A free scan shows the junk files, broken settings and background clutter dragging Windows down - then fixes them in one click.Free scan · Windows 10 & 11This distinction answers a common question: Does the customer pay the PPI interchange? According to NPCI’s cited statement and FAQ, no customer/PPI-holder charge applies to those transactions. That does not mean the arrangement has no interchange; it means the interchange and a customer fee are different things. Nor should the PPI treatment be used to infer the treatment of a bank-account payment or a RuPay credit-card payment.
RuPay credit cards on UPI: a separate arrangement
A RuPay credit card linked to UPI is not the same payment source as a linked bank account or a PPI wallet. NPCI’s operating circular specifies interchange and related ecosystem charges and sets a particular exception: nil MDR for small offline merchants on transactions up to ₹2,000 under the circular’s stated classification. That condition is not a universal exemption for all merchants, all payment sources or all transaction amounts. For an individual transaction, the acquiring bank’s terms and the merchant’s assigned category are important.
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In practical terms, do not apply the small-offline-merchant exception just because a purchase is made in a shop or is below ₹2,000. The stated condition depends on the merchant’s classification as well as the amount and payment source. The cited sources do not supply a universal fee schedule for every other category, so a merchant should check the current acquiring agreement rather than assume a rate or extend the exception beyond its stated scope.
Can a shopkeeper add a UPI surcharge?
For a standard bank-account UPI payment, the cited NPCI statement says the transaction remains free for both customer and merchant; the RBI framework provides the no-charge rule for prescribed modes including UPI. A merchant should not describe a separate service charge as a universal UPI fee without identifying the contractual basis for it. The cited material does not establish a universal current rate for every provider or merchant contract.
If a fee appears on a receipt or in a merchant’s terms, ask what it covers and where it appears in the agreement. In particular, establish whether the payment was bank-account UPI, wallet-on-UPI or credit-card-on-UPI; whether the amount is described as MDR, interchange or a separately contracted service; and, for RuPay credit-card-on-UPI, which merchant classification and transaction threshold apply. NPCI directs merchants to their acquiring bank for onboarding and transaction grievances.
For a shopkeeper, the useful follow-up is not simply “What is the UPI rate?” but “Which payment source and agreement line item does this charge refer to?” A bank-account UPI transaction, a PPI wallet transaction and a RuPay credit-card transaction can fall under different arrangements. If the fee is for equipment, software, rental or another provider service, the merchant should look at that service’s own terms. The cited sources do not establish that such optional arrangements are free, nor that their prices are a universal UPI transaction fee.
How merchants accept UPI and receive funds
NPCI says a merchant seeking UPI acceptance partners with an acquiring bank. The bank handles compliance and risk assessment, generates merchant identifiers, and configures merchant information, including the merchant category code (MCC). The acquiring bank’s MCC matters because merchant category is one of the facts to verify when considering the RuPay credit-card-on-UPI small offline merchant condition.
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NPCI lists four integration modes:
- QR: the customer scans a merchant’s code to initiate payment.
- Intent: the payment flow hands off to a UPI application.
- Application-based: payment is integrated into an application.
- Collect: the merchant requests payment from the customer.
These describe ways a payment can be initiated or integrated; they do not change the need to identify its funding source when working out fee treatment. NPCI says funds are received immediately after the customer confirms payment into the merchant pool or bank account according to the merchant’s agreement. The specific settlement arrangement therefore depends on that agreement, even though the payment confirmation occurs first.
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A QR display stand can show a code, but the stand itself does not onboard a merchant, create a payment-processing arrangement or settle funds; the merchant must obtain acceptance through the acquiring arrangement. The display accessory and the payment service are separate. Buying or printing a QR stand alone does not provide the acquiring relationship NPCI describes.
How to identify who pays a particular charge
- Identify the funding source. Check whether the customer paid from a linked bank account, a PPI wallet or a RuPay credit card linked to UPI. Do not infer the source merely from the fact that the payment used a UPI app.
- Read the charge description. Determine whether the line item is called a payer fee, MDR, interchange or a charge for a separate provider service. These terms describe different kinds of charges and are not interchangeable.
- Check the merchant’s category and amount where relevant. For RuPay credit-card-on-UPI, the small-offline-merchant nil-MDR condition applies only within the stated classification and on transactions up to ₹2,000.
- Ask the acquiring bank for the agreement and MCC. The acquiring bank assigns the MCC and is the relevant contact for merchant onboarding and transaction grievances. Check the applicable settlement and fee terms in the merchant’s agreement.
- Separate transaction policy from optional services. If a charge is for software, equipment, rental or another service, verify that service’s own terms rather than treating it as a universal UPI transaction fee.
This checklist is useful to both sides of a disputed charge. A customer can ask whether a fee is being added to a bank-account UPI payment or whether a different funding source was used. A merchant can compare the line item with the acquiring agreement, the assigned MCC and any provider-service contract. If the facts do not identify a valid basis, contact the acquiring bank; the sources do not support guessing a universal rate from the payment method alone.
How widely UPI is used—and what volume does not tell you
NPCI’s ecosystem statistics surfaced 12,705.16 million person-to-merchant (P2M) transactions for August 2025. That monthly figure shows the scale of merchant payments at that time; it does not show how many merchants paid fees, what any particular merchant was charged, or the volume in 2026. It is context about usage, not evidence of fee incidence or a fee rate.
Frequently asked questions
Is UPI free for merchants?
For ordinary bank-account-to-bank-account UPI, NPCI said transactions remained free for merchants and customers, and the RBI’s prescribed-mode no-charge framework took effect on 1 January 2020. Do not extend this statement to every separate provider service or every payment source.
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Does a shopkeeper pay a charge when I pay by UPI?
If the payment is from a linked bank account, the cited NPCI statement says the transaction remains free for both parties. A merchant may have separate service terms, while PPI-wallet and RuPay credit-card-on-UPI payments have distinct arrangements. Identify the funding source and the specific contract line item before deciding what a charge means.
Can a merchant add a UPI surcharge?
The cited sources support the no-charge treatment for prescribed UPI bank-account transactions; they do not establish a universal current rate or a blanket fee schedule for all merchant services. If a charge is shown, ask what it covers and check the relevant agreement rather than treating it as an automatic UPI fee.
Does the customer pay PPI-on-UPI interchange?
NPCI says there are no charges to the customer or PPI holder for PPI-on-UPI transactions in the FAQ context. Interchange applies within the participant arrangement; it should not be represented as a customer fee.
Is the RuPay credit-card-on-UPI nil-MDR rule for every shop?
No. NPCI’s circular specifies nil MDR for small offline merchants on transactions up to ₹2,000 under the stated classification. It is not a blanket rule for every merchant, category, amount or UPI payment source. Check the merchant’s MCC and acquiring terms.
Sources and scope
- NPCI: UPI – Frequently Asked Questions — merchant onboarding, payment modes, settlement, MCC and PPI-on-UPI customer charges.
- NPCI: “UPI is free, fast, secure and seamless,” 29 March 2023 — bank-account UPI and PPI interchange statement.
- RBI: Database – Historical Data — Section 10A, prescribed UPI mode and the no-charge framework.
- RBI: Reports – Regulation of costs of payment systems — MDR explanation and policy summary.
- NPCI: Operating circular for RuPay Credit Cards linked to UPI, NPCI/2022-23/RuPay/019 — operating and pricing arrangements, including the specified small-offline-merchant condition.
- NPCI: Unified Payments Interface (UPI) Ecosystem Statistics — transaction-volume statistics.
These sources establish the distinctions between payment sources and the cited policy rules, but they do not set one current fee schedule for every acquiring bank or payment aggregator. For a specific merchant, the applicable category, transaction amount and contract terms determine how a particular charge should be understood. Rules and contracts can change, so check the current agreement with the acquiring bank when a real transaction or fee is at issue.
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Frequently Asked Questions
Is UPI free for merchants?
For ordinary bank-account-to-bank-account UPI, NPCI said transactions remained free for merchants and customers. Separate provider-service contracts and other payment sources may have different treatment.
Does a shopkeeper pay a charge when I pay by UPI?
For a linked bank-account payment, NPCI says the transaction remains free for both parties. Identify whether the payment was instead funded by a PPI wallet or RuPay credit card, and check any separate service contract.
Can a merchant add a UPI surcharge?
The cited sources support the no-charge treatment for prescribed bank-account UPI transactions, but do not give a universal fee schedule for every provider service. Ask what a displayed charge covers and check the relevant agreement.
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NPCI says there are no charges to the customer or PPI holder for PPI-on-UPI transactions in this context. Interchange between participants is not automatically a customer fee.
Does the RuPay credit-card-on-UPI nil-MDR rule apply to every shop?
No. NPCI’s circular specifies nil MDR for small offline merchants on transactions up to ₹2,000 under the stated classification. The merchant category and acquiring terms matter.
The Bottom Line
Bottom line: For standard UPI payments from linked bank accounts, NPCI says both customer and merchant remain free of transaction charges. PPI-wallet interchange is not a customer fee, while RuPay credit-card-on-UPI has its own conditions, including a limited nil-MDR case for small offline merchants up to ₹2,000. Identify the funding source, merchant category and exact contract line item before deciding who pays.
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