UPI merchant charge of 0.4%: BJP defends, NCP(SP) warns consumers will pay
Synopsis
India's zero-cost UPI model just cracked. The NPCI has introduced a 0.4% charge on merchant transactions above ₹2,000 — a structural reversal of the MDR-free policy that powered UPI's mass adoption since 2020. BJP says 96% of items are still exempt; NCP(SP) counters that merchants will simply bill it back to consumers. The political fight has only just begun.
Key Takeaways
NPCI issued a circular on 16 September 2026 introducing a 0.4% charge on UPI merchant transactions exceeding ₹2,000 .
The charge is payable by merchants to banks and payment processors; transactions up to ₹2,000 remain exempt.
BJP MP Anurag Thakur said 96% of items above ₹2,000 still attract no transaction charge, defending the digital ecosystem.
NCP(SP) spokesperson Clyde Crasto warned the cost will be passed on to consumers, not absorbed by merchants.
India had scrapped merchant discount rates on UPI and RuPay in 2020 to drive adoption; this circular marks a partial reversal of that policy.
A 0.4 per cent charge on UPI merchant transactions exceeding ₹2,000 has triggered a sharp political divide in New Delhi, with the Bharatiya Janata Party (BJP) defending the digital payments framework and the Nationalist Congress Party (Sharadchandra Pawar) — NCP(SP) — warning that merchants will inevitably pass the cost on to ordinary consumers. The charge follows a circular issued by the National Payments Corporation of India (NPCI) on Tuesday, 16 September 2026.
What the NPCI Circular Says
According to the NPCI circular, a charge of 0.4 per cent will apply to most merchants on UPI payments they receive in excess of ₹2,000 per transaction. The levy is payable to banks and payment processors. Transactions up to ₹2,000 remain exempt, and, according to BJP MP Anurag Thakur, there is reportedly no transaction charge on 96 per cent of items even above that threshold.
What the BJP Said
BJP MP Anurag Thakur cited India's global standing in digital payments to defend the ecosystem. 'India's digital transactions are now cited as an example across the world. Prime ministers and presidents of major countries come to India and see how easily even a roadside vendor, tea seller, small shopkeeper, and individuals can make payments through digital transactions,' he said.
Thakur also turned on the Indian National Congress (Congress) for its response, stating: 'I think the Congress' only job is to mislead people and criticise. I believe this report needs to be studied in greater detail and examined seriously.' He underscored that the exemption on sub-₹2,000 transactions shields the bulk of small-value UPI activity.
NCP(SP)'s Counter: Burden Lands on Consumers
NCP(SP) National Spokesperson Clyde Crasto argued that the charge, however framed, would not stay with merchants. 'The Bharatiya Janata Party government at the Centre has found yet another way to trouble people. Now they are saying that a tax will be imposed on UPI transactions,' Crasto said.
He elaborated that merchants would have little incentive to absorb the cost: 'If a person makes a purchase, the shopkeeper will have to pay the tax... Tell me, which shopkeeper will pay it out of his own pocket? Why would he take that burden? Somewhere, he will find a way to pass that burden on to the customer who is making the purchase.' The argument echoes a classic consumer-incidence concern in indirect taxation.
Why This Matters for UPI's Mass Adoption
UPI has become the backbone of India's retail payments infrastructure, processing billions of transactions monthly — many involving small retailers, street vendors, and neighbourhood shops. The charge, even at 0.4 per cent, could alter the economics for mid-to-large ticket merchant payments, particularly in sectors such as grocery, apparel, and consumer electronics where margins are thin.
Notably, India had previously removed merchant discount rates (MDR) on UPI and RuPay transactions in 2020, a move aimed at accelerating adoption. The reintroduction of any cost structure — even a limited one — represents a structural shift in the zero-cost model that drove UPI's rapid growth among smaller merchants.
What Happens Next
The NPCI circular is expected to face scrutiny from merchant associations and fintech industry bodies, who have long argued that cost-free UPI is central to financial inclusion. Political opposition is likely to intensify the debate ahead of any formal implementation. How the government responds — whether through clarifications, rollbacks, or implementation timelines — will be closely watched by India's vast merchant community.
Point of View
But that framing sidesteps the incidence question NCP(SP) is raising: in thin-margin retail, a 0.4% levy does not stay with the merchant. More importantly, if the zero-cost promise is conditional, it undermines the trust that made UPI a global showcase — and that is the harder cost to quantify.
NationPress
16 Sept 2026
Frequently Asked Questions
What is the new UPI merchant charge announced by NPCI?
The National Payments Corporation of India (NPCI) has introduced a 0.4% charge on UPI merchant transactions above ₹2,000 per transaction, payable to banks and payment processors. Transactions up to ₹2,000 remain exempt under the new structure.
Will consumers have to pay the new UPI charge?
Formally, the charge applies to merchants, not consumers. However, NCP(SP) spokesperson Clyde Crasto has argued that merchants are unlikely to absorb the cost and will instead pass it on to buyers, effectively making it a consumer-side burden.
What did BJP MP Anurag Thakur say about the UPI charge?
Thakur defended India's digital payments ecosystem, citing its global recognition, and noted that transactions up to ₹2,000 are exempt and that 96% of items above that threshold reportedly carry no transaction charge. He also criticised the Congress for what he called misleading commentary on the issue.
How does this change UPI's existing fee structure?
India eliminated merchant discount rates on UPI and RuPay transactions in 2020 to accelerate digital adoption. The NPCI's new circular represents a partial reversal of that zero-cost model, reintroducing a charge specifically on higher-value merchant receipts.
Who is most affected by the UPI merchant charge?
Merchants receiving UPI payments above ₹2,000 per transaction are directly affected — particularly those in sectors like grocery, apparel, and consumer electronics. Small street vendors and low-ticket retailers remain largely shielded by the ₹2,000 exemption threshold.
