SRINAGAR: The Government of India has said Unified Payments Interface (UPI) transactions will remain free for citizens, clarifying that any future Merchant Discount Rate (MDR) will apply only to a limited category of merchant transactions above a specified threshold.
The government said consumers making payments through UPI will not be charged transaction fees and all person-to-person (P2P) transactions will continue to remain free.
It said that if MDR is introduced, it would be levied at a nominal rate on selected merchant transactions above a prescribed threshold and would be significantly lower than MDR applicable to debit or credit cards. The government also stressed that the charge would not be imposed across all UPI merchant transactions.
The clarification comes amid debate over a recent amendment to the Payment and Settlement Systems Act, 2007, with the government saying the provision has been misunderstood as a move to impose charges on ordinary UPI users.
Under the proposed changes, once Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, which seeks to amend Section 10A of the PSS Act, the “UPI and Services Steering Committee” headed by the National Payments Corporation of India (NPCI) will decide on MDR, if any.
The government said the amendment is intended to provide an enabling framework for the long-term sustainability and expansion of UPI rather than impose charges on users.
It said the rapid growth in UPI transactions requires continuous investment in cybersecurity, fraud prevention and digital infrastructure. The government also cited the need for greater competition in the sector and said dependence on subsidies alone would not be sustainable for the next phase of UPI’s growth.
According to the government, UPI processed 2,366 crore transactions worth Rs 29.9 lakh crore in July 2026 alone, making it the world’s largest real-time payment system. The platform, launched in 2016-17, is also operational in 11 foreign countries, while several other countries have expressed interest in adopting the system.
The government rejected reports suggesting that external influences were behind the proposed policy changes, describing such claims as unfounded and misleading. It said UPI had been introduced in 2016 and made free for citizens and merchants from January 2020 as part of the government’s efforts to expand digital payments.
The government said the proposed framework was aimed at ensuring that India’s digital payment infrastructure remains sustainable, competitive, secure and capable of supporting the country’s expanding digital economy.
It also said the next phase of UPI growth would focus on expanding access in rural and semi-urban areas while maintaining affordability and technological resilience.
Reiterating its position, the government said UPI would remain free for citizens and that there would be no charges on everyday transactions by users. Any future MDR, it said, would be nominal and restricted to a limited set of merchant transactions above a prescribed threshold.
The government urged citizens to rely on information issued by the Ministry of Finance, the Reserve Bank of India and NPCI and avoid circulating unverified claims regarding UPI charges.
