Major UPI Changes & Charges in 2025: What the Government of India Has Introduced

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Apr 5, 2025 - 03:28 Updated: Apr 7, 2025 - 05:21
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Major UPI Changes & Charges in 2025: What the Government of India Has Introduced

Unified Payments Interface (UPI) continues to be the backbone of India’s digital payment ecosystem. In 2025, some new developments were introduced by the National Payments Corporation of India (NPCI) that have led to questions about whether UPI is still free to use. Here's a clear explanation of the recent changes to UPI transaction charges.

Are You Still Paying Zero Charges for UPI?

For most users, nothing has changed—UPI payments remain free when:

  • Sending money to friends, family, or anyone (peer-to-peer)

  • Making purchases via QR code from your bank account

  • Paying utility bills or recharging from your UPI-linked bank account

So, Who's Being Charged Now?

The new fee structure only applies to merchant transactions made through Prepaid Payment Instruments (PPIs), such as wallets linked to UPI—think Paytm Wallet, PhonePe Wallet, etc.

Here’s what to know:

  • The fee is only charged on merchant payments over ₹2,000 made using UPI-linked wallets.

  • The interchange fee can go up to 1.1% of the transaction value.

  • This fee is paid by merchants, not customers.

  • Peer-to-peer transfers and most day-to-day UPI payments are unaffected.

Why Were These Charges Introduced?

The goal of introducing this small fee is to:

  • Support the infrastructure costs of UPI

  • Make wallet-based UPI payments more sustainable for fintech companies

  • Balance innovation with economic feasibility for payment service providers

This move mainly targets high-value merchant transactions and helps fintechs and banks recover operational costs without affecting general consumers.

Does This Affect You?

Not really. If you're using UPI from your bank account, your experience stays the same. Even when using wallets, the fee is handled by merchants and not passed on to customers.

Small vendors, local shops, and daily transactions under ₹2,000 via bank-linked UPI remain fee-free.

Summary

  • UPI is still free for personal use and regular payments.

  • A 1.1% interchange fee is applied only to wallet-based merchant transactions above ₹2,000.

  • Customers don’t pay this fee—merchants do.

  • The update aims to create a sustainable financial model for UPI wallet providers.

Digital payments in India continue to evolve, and these changes reflect the need for balancing affordability with long-term system growth. UPI remains the most user-friendly and accessible digital payment method in the country.

Source: AI Generated