PhonePe, Razorpay back UPI charges on bigger merchants
What's the story
Leading Indian fintechs, PhonePe and Razorpay, have supported the industry's push for merchant charges on larger businesses. The move is aimed at payments made through the Unified Payments Interface (UPI). Sameer Nigam, co-founder and CEO of PhonePe, and Harshil Mathur, co-founder and CEO of Razorpay, have both backed this proposal. They stressed that while these fees may be levied on larger merchants, end consumers will not bear any additional costs for their UPI transactions.
Business sustainability
PCI seeks to differentiate between free and chargeable transactions
Nigam and Mathur's advocacy for a sustainable business model aligns with the Payments Council of India (PCI).
The industry body has sought to differentiate between free daily transactions and charges on select merchant payments. This is to ensure the commercial viability of UPI services.
The Indian government is reportedly considering introducing a Merchant Discount Rate (MDR) for larger merchants, which could be in the range of 5-7 basis points.
Fee details
Peer-to-peer transactions to remain free
The MDR proposal, as per ET's report, could target businesses with an annual turnover of ₹1-1.5 crore or more.
However, peer-to-peer transactions and payments to small merchants will continue to remain free of charge.
This is in line with Nigam's assurance that "consumers will not be charged anything for making UPI payments."
Economic sustainability
Mathur warns of system deterioration without sustainable model
Mathur stressed the importance of sustainable economics for UPI.
He said, "Every great digital infrastructure needs a sustainable model behind it, it enables continuous investment in reliability, security, and innovation."
He warned that without such a model, the system could deteriorate.
This statement further emphasizes the need for a balance between charging larger merchants and keeping services free for consumers.
Legislative change
Bill allowing banks, payment companies to charge MDR
The Lok Sabha recently passed the Taxation and Other Laws (Amendment) Bill, 2026.
The amendment removes the legal bar on banks and payment companies charging MDR on notified digital payment modes.
However, it doesn't impose MDR itself; it only empowers the Centre to specify where charges may be permitted.
No rate or threshold has been finalized yet under this new legislation.
Industry support
Pine Labs CEO supports reasonable charges for higher-value transactions
Pine Labs CEO Amrish Rau has welcomed the amendment to the law as "a step in the right direction."
He said reasonable charges could be levied on merchants for higher-value transactions without impacting customers.
Rau also stressed that peer-to-peer and consumer payments should remain free, while the industry needs a monetization model to fund technology, innovation, and cybersecurity.