In a major policy change, ICICI Bank has announced that it will start charging payment aggregators (PAs) for UPI transactions routed through the bank, beginning August 1, 2025. This move marks a significant shift from India’s long-standing zero-fee UPI model, as banks grapple with rising infrastructure costs amid a surge in digital transactions.
Under the new fee structure, ICICI Bank will charge 2 basis points per transaction (0.02%), capped at ₹6, for PAs who maintain an escrow account with the bank. For those without an escrow account at ICICI, the fee rises to 4 basis points per transaction (0.04%), capped at ₹10. However, there will be no charge if the UPI payment is credited directly into a merchant’s ICICI Bank account.
Importantly, these charges apply only to business-facing payment aggregators and fintech platforms that handle high volumes of UPI transactions on behalf of merchants. Individual users making personal payments will not be affected.
While everyday users remain untouched by this change, the ripple effects are likely to be felt by merchants using third-party platforms like Razorpay, Paytm for Business, or Cashfree. These platforms may revise their own fee structures depending on how they choose to absorb or pass on the new costs.
The timing of this decision is not random. It follows similar steps taken by Yes Bank and Axis Bank, and reflects growing concerns over the strain UPI transactions place on banking infrastructure. In June 2025 alone, India recorded over 18 billion UPI transactions—a staggering volume for a system that currently yields no direct revenue for banks under the zero-MDR (Merchant Discount Rate) policy.
Faced with rising backend maintenance costs and no earnings from UPI itself, banks are increasingly turning to business intermediaries like payment aggregators to share the financial burden.
Industry observers expect this move to trigger a wave of similar announcements from other leading banks, including SBI, HDFC Bank, and Kotak Mahindra Bank. If adopted widely, these fees could gradually increase the cost of accepting UPI payments for merchants, particularly those relying on third-party intermediaries rather than banking directly.
For now, peer-to-peer (P2P) transactions and small personal payments remain free, maintaining accessibility for the average consumer.
ICICI Bank’s new policy may mark the beginning of a more sustainable—but also more complex—phase for India’s UPI ecosystem. As the market evolves, the challenge will be to strike a balance between preserving free access for users and enabling banks and fintechs to maintain robust digital infrastructures.
Businesses are being advised to re-evaluate their partnerships with payment aggregators, consider direct integrations with banks where feasible, and closely monitor developments as the landscape continues to shift.
