ICICI Bank will begin charging payment aggregators for processing UPI transactions, marking the first such move by a leading Indian lender as the banking industry pushes back against the cost burden of free digital payments.
Starting August 1, 2025, the private-sector bank will implement a differentiated fee structure, people close to the developments confirmed with YourStory.
Payment aggregators (PAs) that hold an escrow account with the bank will be charged 2 basis points (bps) per transaction, capped at Rs 6. Those without such a relationship will face a 4 bps fee, capped at Rs 10 per transaction.
The fees will apply only when funds are not being settled into a merchant account maintained with ICICI Bank, the people said, asking not to be identified as the information is not public.
ICICI Bank’s decision to begin charging payment aggregators for UPI transactions stems from rising costs associated with technology infrastructure, transaction processing, and other operational factors amid evolving economic conditions.
The Head and Tale was the first to report that the private-sector lender will introduce a fee structure starting August 1, 2025.
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UPI transactions in India remain completely free for both merchants and consumers, as the government has eliminated the Merchant Discount Rate (MDR)—a processing fee typically paid by merchants that’s charged as a percentage of transaction value for card and digital payments. Banks and payment systems are barred from charging merchants directly or indirectly, according to the Income Tax Act, 1961.
An executive at a large payment aggregator, speaking on condition of anonymity, said the company is planning to reduce its reliance on ICICI Bank but is concerned that other banks may soon follow with similar charges.
ICICI Bank acts as a Payee Payment Service Provider in the UPI ecosystem, helping merchant or aggregator accounts receive and settle payments. It is the third-largest Payee PSP in India after Yes Bank and Axis Bank, having settled 1.7 billion UPI transactions in June 2025 alone.
Edited by Kanishk Singh
