In a significant move that could reshape India’s digital payments landscape, ICICI Bank will begin levying charges on payment aggregators (PAs) for processing UPI transactions, starting August 1, 2025. This marks the first time a major private Indian bank is implementing such a fee structure, amid growing concerns over the sustainability of free digital payments.
Under the new structure:
- PAs with escrow accounts at ICICI Bank will be charged 2 basis points (bps) per transaction, capped at ₹6.
- PAs without such accounts will incur a 4 bps fee, capped at ₹10 per transaction.
Importantly, these charges will only apply when the transaction is not settled into a merchant account with ICICI Bank, according to insiders familiar with the policy.
This decision comes as the bank seeks to offset increasing infrastructure and operational costs associated with the surging volume of UPI transactions. ICICI Bank, which serves as a Payee PSP (Payment Service Provider), processed a staggering 1.7 billion UPI transactions in June 2025, placing it third after Yes Bank and Axis Bank.
Currently, UPI transactions are free for consumers and merchants due to the elimination of the Merchant Discount Rate (MDR) by the government. However, banks and fintechs continue to bear the backend costs.
Industry insiders warn that other banks might soon follow suit, potentially leading to a wider shift in the UPI cost-sharing model.