Consumers using UPI may soon encounter charges on substantial UPI transactions to merchants, as regulators are considering a fee of approximately 0.4 per cent, said sources familiar with the development.The National Payments Corporation of India (NPCI) and various payment regulators are engaging with banks and payment firms regarding the proposed fee framework, including the distribution of charges among banks, payment applications and payment aggregators, the sources said.This follows the government’s clarification that UPI transactions below Rs 2,000 incur no charges.The proposed 0.4 per cent rate is not conclusive, and the final fee, along with its distribution within the payments ecosystem, is yet to be determined.Regulatory bodies, including the NPCI and the Reserve Bank of India (RBI), are favouring a 0.4 per cent fee on higher-value UPI transactions, according to one of the sources.If applied at that rate, a Rs 5,000 merchant transaction would incur a fee of Rs 20, while a Rs 10,000 transaction would result in a Rs 40 charge. For a payment of Rs 50,000, the charge would amount to Rs 200.These calculations are merely indicative and based on the proposed 0.4 per cent rate. The final rate has not yet been determined.Sources said Tuesday’s consultation agenda includes the total fee to be charged on payments to merchants and its distribution among banks, payment applications and aggregators.The proposed charge could generate an additional revenue stream for various segments of the payments ecosystem.According to one source, banks may receive 40 per cent of the fee, with the remaining 60 per cent potentially divided equally between the payment app and the provider of merchant payment services.This would suggest a potential 40:30:30 split among banks, payment applications and merchant payment service providers.However, this is merely a proposal currently under consideration and has not yet been finalised.The possible implementation of UPI charges does not imply that every UPI user will immediately be required to pay a fee.The proposed monetisation targets person-to-merchant (P2M) transactions, according to sources. Transactions between individuals, known as peer-to-peer (P2P) payments, are expected to remain free of charge.This means that a UPI transaction between two individuals would remain free, while a significant payment from a customer to a merchant could incur a fee.The government had previously stated that any forthcoming merchant discount rate (MDR) on UPI would be minimal and would affect only a limited range of merchant transactions.The development follows the government’s announcement on Monday that banks or payment system providers cannot impose charges on UPI transactions of up to Rs 2,000.The notification also safeguards payments processed using RuPay-enabled debit cards against such fees.The change essentially creates room for an alternative fee structure for higher-value UPI transactions. A detailed operational framework is expected to establish how these charges would be implemented.