The Reserve Bank of India (RBI) confirmed on Thursday that the Unified Payments Interface (UPI) will start levying a Rs 2 fee for each merchant transaction from 15 October, ending the platform’s free‑for‑merchants policy. The move is part of a broader regulatory push to balance the UPI ecosystem’s revenue streams.
For small retailers, the fee translates to an additional cost of Rs 2 on every payment processed through UPI, a modest amount that could add up to thousands of rupees over a year. The fee, while negligible per transaction, will be absorbed by merchants or may be passed on to consumers via higher prices.
Fund investors, however, stand to feel the ripple effect differently. If a mutual fund’s UPI‑generated inflow is 25 % of its total assets, a Rs 1 lakh investment incurs an extra Rs 24 fee paid by the fund house. The fee’s inclusion in a fund’s expense ratio could marginally increase annual charges, but the impact is dwarfed by the 2.07 % expense ratio of a typical flexi‑cap plan, which amounts to Rs 2,065 on the same sum.
The real savings lie in choosing a direct plan. Switching a Rs 1 lakh investment from a regular plan (2.07 %) to a direct plan (0.86 %) slashes the annual fee by Rs 1,205—over six hundred times the UPI merchant fee. Investors can immediately check their fund’s expense ratio postings and adjust their holdings to capitalize on the lower costs.
Meanwhile, net‑banking remains a costly alternative, with transfers historically costing between Rs 3 and Rs 14 per transaction. The RBI’s decision means merchants must decide whether to absorb the fee or adjust pricing, while investors can act now to secure lower expense ratios before the fee’s market impact fully materializes.