ICICI Bank to charge Rs 6 per UPI Transactions via G-Pay, PhonePe, Paytm and Others

The National Payments Corporation of India (NPCI) is operator of Unified Payments Interface (UPI) has pointed banks and payment apps to discontinue all P2P (peer-to-peer) starting from August 1, 2025.

For unaware, Payment Aggregators (PAs) act as a middleman between banks and merchants to simply the payment process by pooling funds and settling them with the merchant.

ICICI had shared its official communications with PAs, in which it was specified that the bank will impose 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. (applicable for PAs who have escrow account with bank).

And if PAs route their transaction through the merchant’s ICICI Bank account, no fees will be imposed. whereas, on the other hand banks such as Axis, were charging anywhere between 6-9 bps as processing charges for UPI payments.

It is important to consider that neither user nor merchant discount rate. but, banks make a notable cost to maintain and process the UPI payment infrastructure in addition to paying switch fee to NPCI. Consequently, banks may pass these costs to PAs. However, experts predict that soon, these costs could drop down to the end consumer, where UPI transactions are free for consumers.

One expert says that this is an important growth for banks to introduce a transaction controlling fee, as ICICI Bank has now done, since it signals a transition to long-term sustainability.

UPI currently supports two types of transactions Pull and Push. In a push transaction, the payer starts off the payment by scanning a QR code or entering the recipient’s UPI ID. on the other hand, in a pull transaction, the beneficiary starts the process, and the payer authorizes it by entering their UPI PIN.

Recently in one of the meetings held in Mumbai, RBI governor Sanjay Malhotra pointed out that the current UPI model, where consumers do not have to pay any charges, and banks are sponsored by the government to maintain UPI payment and not pass on the cost to consumers, may not be supportable for long time.

MuffinPay, RazorPay and PayU, other players in the Indian Payment Aggregator space confirmed that they are unable to offer any insights on this matter now.

One expert says that almost all banks impose this charge for processing UPI transactions, which comes under the gaming category. Other banks, such as YES Bank, also charge PAs a specific amount in case they combine with them, or if in case they do not maintain a specific amount of funds in their escrow accounts.

A public sector bank which has recently merged with NTT Data Payments will soon start charging for maintaining the UPI transactions, with the charges in the range of 2bps to 10bps per transaction (Rs 0.02 to Rs 0.01 per Rs 100).

The banks impose significant charges in maintaining the payment processing infrastructure so that transactions do not experience any technical declines. In addition to that, banks also have to pay a switch fee to NPCI to quickly process UPI transactions. NPCI charges 0.02 percent of each transaction from banks (as switch fee), as explained above.

At present, while the drop down of these charges to merchants is already happening in the form of reconciliation charges this might be some time away for UPI customers, says an expert of (an independent digital payments with experience of 20 years).

He added by saying that charges dropping down may not be possible due to government interventions, but a possible risk of people switching back to cash. And still there are high chances that these above-mentioned charges may not be passed to customers anytime soon because banks potentially have enough headroom to absorb these costs, without having to impose them on consumers.