Starting August 1, 2025, ICICI Bank will impose transaction fees on payment aggregators (PAs) handling UPI payments. PAs with an escrow account at ICICI will pay 2 basis points per transaction, capped at ₹6, while those without will be charged 4 basis points, capped at ₹10. Transactions settled directly into an ICICI merchant account will remain exempt, as the bank earns interest on the funds.

This move marks a pivotal shift in the UPI ecosystem, long operated under a zero Merchant Discount Rate (MDR)model for consumers and merchants. With UPI volumes surging, banks face mounting costs for infrastructure, maintenance, and UPI switch operations—without earning MDR revenue. Charging PAs is a step toward recovering these expenses.

Payment aggregators must now decide whether to absorb the cost—cutting into their margins—or pass it on to merchants, potentially increasing costs for small businesses. In turn, these businesses may adjust pricing, indirectly affecting consumers.

The RBI has previously hinted that the zero-charge UPI model is unsustainable in the long run, advocating for shared costs to maintain operational stability. ICICI’s decision follows similar steps by Yes Bank and Axis Bank, suggesting a growing industry shift.

In essence, ICICI’s fee model could bolster UPI’s financial sustainability but erodes the long-standing perception of “free” digital payments, forcing the ecosystem to adapt to a more cost-conscious future.