India is advancing measures to update the revenue structure for its Unified Payments Interface, the government-built network that handles everyday transfers, through fresh legislation that may allow charges on select merchant transactions.

The bill establishes the foundation for revisiting the zero-merchant-discount-rate setup, which has kept fees off UPI payments for businesses since the start of 2020.

This change arrives as UPI reaches new heights, handling 23.66 billion transfers valued at roughly 29.88 trillion rupees, or about 313.4 billion dollars, in July according to the National Payments Corporation of India.

The country removed merchant fees on UPI activity in January 2020 to speed adoption, relying instead on government support to cover operations and growth.

The move follows extended discussions among the finance ministry, the central bank, and payment providers on sustainable funding for the expanding system. Banks and fintech players have noted that covering rising volumes and infrastructure expenses without merchant contributions has grown more difficult.

Amrish Rau, chief executive of Pine Labs, posted on X that reaching 90 percent penetration and expanding UPI overseas will require ongoing spending by startups, fintechs, and banks on technology, new features, and security.

Rau added that letting the sector recoup some costs from merchants, while leaving consumer and peer transfers free, would strengthen the long-term outlook for the network.

The bill stops short of setting any merchant fees or naming which transfers would be covered, leaving those choices for later rules.

Analysts see the step as the start of a fresh income source for payment firms. Jefferies projected in a recent note that fees on higher-value UPI activity could add between 50 billion and 100 billion rupees, or roughly 525 million to 1.05 billion dollars, in yearly revenue by fiscal 2028 at rates of 15 to 30 basis points.

The Economic Times reported last month that officials may restrict any charges to larger merchants instead of applying them broadly.

Bernstein noted in its own analysis that this targeted method would keep the service convenient for users while opening a useful revenue stream for banks and payment firms, since transfers above 2,000 rupees represent just 4 percent of volume but nearly 70 percent of value.

Nations where UPI now operates, including Singapore, the United Arab Emirates, and France, will monitor the outcome closely.

The rules could matter most for the leading players in India digital payments. PhonePe, owned by Walmart, and Google Pay together handle nearly 80 percent of UPI volume per NPCI figures, though the final impact on each will hinge on how any new fees are shared among banks, apps, and other participants.