India: NPCI to Pay Banks ₹300 per QR Code to Bring UPI to Small-Town Shops
India’s national payments operator wants banks to take UPI, the country’s instant QR payment system, deeper into small towns. A new three-year incentive scheme will pay banks for every QR code and soundbox they place with small shops, and for growth in the small payments those shops receive.
The twist is where the money comes from: the scheme will be funded from the merchant fees that UPI is about to start charging on larger shop payments.
Key facts
- The National Payments Corporation of India (NPCI) announced the UPI Vyapaar Saksham Scheme in a circular dated 11 November 2026. Vyapaar means trade or business in Hindi.
- Banks get ₹300 per physical QR code and ₹750 per soundbox placed with an eligible new small merchant, once the shop is actively used.
- Small merchants are those with annual turnover of up to ₹40 lakh (₹4 million) in the previous financial year. Only UPI payments of ₹2,000 or less count.
- Issuing banks, acquiring banks, payer payment service providers and UPI apps will each put 5% of their merchant discount rate (MDR) share into the fund.
- The scheme runs for three years from the date UPI MDR takes effect, which NPCI has not yet announced.
How the scheme works
The fund is split into three parts that cannot be moved between each other. Thirty per cent goes to onboarding new merchants. A bank earns the QR code or soundbox payment only if the shop records at least 25 eligible transactions in two months of a quarter, with at least ₹5,000 in payments each month. That rule is meant to stop banks from handing out QR stickers that nobody uses.
Half of the fund rewards growth. Banks that lift eligible small-merchant volumes by at least 5% quarter on quarter earn 0.03% of the total value of those payments, with an extra 50% in the target regions. The last 20% pays 0.20% of the extra value a bank adds in those regions compared with the previous quarter.
The target regions are Tier 3 to Tier 6 towns, the north-eastern states, and Jammu and Kashmir and Ladakh. Shops in bigger cities qualify only if they are covered by government schemes such as PM SVANidhi, a micro-loan programme for street vendors, and PM Vishwakarma, which supports traditional artisans.
NPCI will run the fund, check claims and pay banks within 30 days of a quarterly claim. Banks must report merchant locations and device details, and their claims must be certified by internal and external auditors.
Why it matters
UPI is free for most users, which has made it hugely popular but has left banks and payment apps with little reason to spend money on reaching small shops outside the big cities. Under new rules, merchant payments above ₹2,000 are set to carry a 0.4% MDR, a fee paid by the merchant to the payment providers, capped at ₹300. Payments of ₹2,000 and below, and person-to-person transfers, stay free.
By recycling part of that new fee into small-merchant acceptance, NPCI is trying to make sure the fee does not simply become extra profit for large players. NPCI’s stated goals are ambitious: 6 million to 10 million new physical QR codes a year, 500,000 to 1 million new soundboxes, and 30% to 50% yearly growth in payments at existing small merchants.
The design will interest other markets in the region, from Indonesia’s QRIS to Malaysia’s DuitNow QR, that face the same question: who pays to bring the last mile of small traders onto national QR systems when the payments themselves are cheap or free?
What to watch
- The MDR start date. The scheme’s three-year clock only starts once UPI merchant fees begin, and retailer pushback has already delayed the rollout.
- Uptake by banks. Whether the ₹300 and ₹750 payments are enough to cover the cost of reaching shops in remote areas.
- The six-monthly review. NPCI plans to review the scheme every six months, so the payouts and rules may change.
Related on FinDeskAsia: How ASEAN cross-border QR payments are growing and DuitNow explained.
Sources: Inc42 (November 2026); The Tribune/ANI (November 2026); Angel One (November 2026); Inc42 (September 2026).
