The government on Saturday clarified that UPI transactions will continue to remain free for consumers, amid concerns that recent changes to the Payment and Settlement Systems Act, 2007 could pave the way for transaction charges.
The clarification came after the Payment and Settlement Systems Act, 2007 was passed in the Lok Sabha earlier this week. Reports had raised concerns that banks and payment companies could eventually levy charges on UPI transactions.
The Centre said the vast majority of UPI transactions would remain free for both customers and merchants. It specifically stated that consumers making payments would not face any transaction charges and that all person-to-person (P2P) transactions would continue to be free.
However, the government said nominal Merchant Discount Rate (MDR) charges could be introduced for a limited category of merchant transactions above a specified threshold.
MDR is the fee charged to merchants for accepting digital or card payments. It has remained zero for UPI transactions so far, meaning merchants generally do not pay a fee for accepting UPI payments.
The government said any future MDR would not be imposed universally and would be considerably lower than charges applicable to debit and credit card transactions.
The Centre added that once Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), will decide whether MDR should be introduced.
The government also rejected reports suggesting that external pressure influenced the amendment, calling such claims “completely false and misleading”.
It said the move was aimed at ensuring that India's digital payments ecosystem remains sustainable, competitive and capable of supporting the country's expanding digital economy.
Follow us
