India is opening the door to fees on large UPI payments. A merchant discount rate of 0.4% will be applied to some person-to-merchant payments above Rs 2,000. Reports say the fee won't be passed to customers. Smaller UPI payments keep their no-fee status.

The change focuses only on bigger transactions. It marks a change from the current no-fee structure. The new rate applies only to eligible payments above the Rs 2,000 threshold. Consumers are not charged the fee, as reports indicate. The fee applies to person-to-merchant payments, not to all UPI transactions.

The government and the central bank have weighed the move for some time. The idea is to cover the cost of big digital transactions. Banks and payment firms have repeatedly sought such a charge. The current system has a zero-cost model for most users. A fee on larger merchant payments could reshape the market. The reported rate is lower than some had expected. It remains unclear whether the fee will be phased in. Consumers using UPI for small purchases will see no difference.