Will UPI remain free in 2025? ICICI begins charging, know where other banks stand, RBI rules, and what users should know

Time of India

19 hours ago

ICICI Bank is planning to charge payment aggregators (PAs) for processing UPI transactions, a move confirmed by sources but unacknowledged by the bank. This could lead to increased costs for PAs, potentially trickling down to consumers in the future. For PAs with an escrow account with the bank, the charges will be significantly less as compared to those who do not operate this account with ICICI. Read on to know when, and if, these charges will trickle down to the consumer.
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Who are Payment Aggregators?
UPI won't remain free for long-RBI
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What are the Payment Aggregators saying in this regard?
How much does NPCI charge banks in switch fees?
How long will it take for these charges to be passed on to consumers?
On August 1, 2025, various media organisations reported that ICICI Bank was planning to charge payment aggregators (PAs) in order to process UPI transactions, effective August 1, 2025. ET Wealth Online reached out to the bank, but it declined to comment.However, sources at ICICI Bank confirmed this development, stating that the bank had indeed sent an email to this effect to PAs towards the end of June. ICICI had reportedly sent out official communications to PAs, wherein it was mentioned that the bank will levy a fee of 2 basis points (Rs 0.02 per Rs 100) per transaction, which will have a maximum limit of Rs 6 per transaction. However, this is only applicable for PAs who have an escrow account with the bank.For PAs who do not have an escrow account with ICICI Bank, these charges will be upped to 4 basis points per transaction, capped at Rs 10/transaction.Sources also confirmed to ET Wealth that if PAs route their transaction through the merchant's ICICI Bank account, no fees will be levied. On the other hand, other banks, such as Axis, were charging anywhere between 6-9 bps as processing charges for UPI transactions.Note that neither users nor merchants will currently have to bear this cost, thanks to zero MDR, or merchant discount rate. However, banks incur a significant cost for processing and maintaining the UPI payment infrastructure, in addition to paying a switch fee to NPCI. Hence, banks may pass on these costs to PAs.However, experts anticipate that sooner or later, these costs could trickle down to the end consumer, essentially ending the current era, where UPI transactions are free for consumers.As Rohit Mahajan, Founder and Managing Partner of plutos ONE, says, 'this is a welcome and overall necessary evolution for banks to introduce a transaction-handling fee, as ICICI Bank has now done, since it signals a transition to long-term sustainability'.'We anticipate this will also continue to simplify the backend infrastructure, increase transparency, and increase transaction volumes over the medium term, as platforms become more committed to the success of UPI. Given these nominal payouts, banks will be able to invest more confidently in systems, fraud controls, and uptime, all of which outcomes will ultimately benefit end users', he further adds.So, will all banks now follow suit and start levying charges on PAs for processing UPI transactions? What does this mean for the consumer? Read on to know moreThink of payment aggregators as the payment bridge between the business and the consumer. PAs are third party service providers who allow businesses to process and accept different modes of payments such as credit cards/debit cards, net banking, UPI and more without having to individually worry about every mode of payment.At present, according to the RBI website, as of July 16, 2025, there are 8 existing PAs which have been authorised by the apex bank to operate as online PAs, while another 4 have their applications under process. Similarly, for new PAs, 9 entities have been granted in-principle authorisation, while applications for 17 other entities are in process.At a recent event in Mumbai, RBI governor Sanjay Malhotra had highlighted that the current UPI model, where consumers do not have to pay any charges, and banks are subsidised by the government to process UPI transactions and not pass on the cost to consumers, may not be sustainable in the long run.'Costs will have to be paid. Someone will have to bear the cost,' he said, highlighting that while UPI is presently a zero-charge platform, it does have operational expenses.ET Wealth Online exclusively reached out to multiple PAs in this regard. Cashfree Payments refused to comment on this matter, stating that the matter is still at a very early stage.Similarly, MuffinPay, RazorPay and PayU, other players in the Indian Payment Aggregator space, confirmed to ET Wealth Online that they are unable to offer any insights on this matter at the moment. However, none of these PAs also explicitly denied receiving communication from ICICI regarding UPI payment processing charges.As per Rahul Jain, NTT DATA Payment Services, this communication has primarily gone to payment aggregators who are integrated with ICICI Bank.Jain further explains that almost all banks levy this charge for processing UPI transactions, which fall under the gaming category. Other banks, such as YES Bank, also charge PAs a certain amount in case they integrate with them, in case they do not maintain a specific amount of float or funds in their escrow accounts.'A public sector bank which NTT Data Payments has recently integrated with has also informed us that they will also begin charging us for processing UPI transactions, with the charges being anywhere in the range of 2bps to 10 bps per transaction(Rs 0.02 to Rs 0.1 per Rs 100)', he adds.As mentioned above, banks incur significant charges in maintaining and upscaling the payment processing infrastructure, so that transactions do not experience high downtime, technical declines and more. Add to that, banks also have to pay a switch fee to NPCI in order to swiftly process UPI transactions. According to Jain, NPCI charges 0.02% of each transaction from banks as a switch fee.Krishna Kumar, an independent digital payments expert with over 20 years of career spanning the APAC region, explains that at present, while the trickling down of these charges to merchants is already happening in the form of reconciliation charges, transaction-level reports, this might be some time away for UPI customers.'Charges trickling down may not be possible due to government interventions, and also a possible risk of people switching back to cash. Also, there are high chances that these charges may not be passed down to customers anytime soon, since banks potentially have sufficient headroom to absorb these costs, without having to levy them on consumers', he adds.