Some merchants in Chennai have reportedly begun charging customers an additional fee for UPI payments, despite instructions that any applicable transaction charge must be paid by the business and not passed on to consumers, according to a report by Dinamalar.
The reported charges are being collected in parts of the city, including Pattinapakkam, even before the new merchant payment arrangement is introduced. Customers are allegedly being asked to pay an additional Re 1 on a Rs 100 UPI transaction, Rs 2 on a Rs 200 transaction and Rs 3 on a Rs 300 transaction. The report also says some customers who refuse the extra payment are being told to pay in cash instead.
The issue has emerged as the National Payments Corporation of India, or NPCI, is reported to have announced a service-charge mechanism for businesses accepting higher-value UPI payments. Under the arrangement described in the report, businesses receiving more than Rs 2,000 through UPI would pay a charge of 0.4 per cent. For transactions of Rs 75,000 or more, the charge would be capped at Rs 300.
The central distinction in the reported framework is who bears the cost. The charge is intended for the merchant or business accepting the payment, while customers are not to be charged an additional fee for using UPI. The reported practice in Chennai reverses that arrangement by applying small surcharges directly to consumers, including for transactions below the Rs 2,000 threshold cited in the announcement.
The dispute highlights the operational tension created when a payment system is widely used as a cash alternative but its costs are understood differently by merchants and customers. UPI payments are described in the report as free for users across the country. A separate fee at the point of sale can therefore alter the final price of everyday purchases and may discourage customers from using digital payments, particularly for smaller-value transactions.
For merchants, the issue is linked to the cost of accepting digital payments and to the reported fee structure for higher-value transactions. The report says traders have also demanded that the fee-fixing system be withdrawn. At the same time, members of the public have called for action by the central and state governments against merchants who collect charges from customers.
The allegations also raise a consumer-protection question for digital commerce in cities: how easily can users identify whether a surcharge is an authorised payment cost, a merchant-imposed charge or an incorrect interpretation of a payment rule? The reported practice of requiring cash when customers decline the additional amount could further reduce payment choice at shops and service establishments.
Dinamalar reported that public demands for government action have followed the complaints from customers, while traders have sought cancellation of the fee structure. The report did not cite a response from NPCI, the central government, the Tamil Nadu government or the merchants named in the complaints. Further action by the relevant authorities will determine whether the reported charges are investigated and stopped.
