No charges on UPI transactions for users, limited merchant MDR possible: Govt
New Delhi, Aug 8
The government on Saturday clarified that consumers will not be charged for making payments through the Unified Payments Interface, while any future merchant discount rate will be limited to select transactions above a specified threshold.
The Finance Ministry said that all person-to-person (P2P) UPI transactions will continue to remain free and there will be no blanket MDR on merchants.
"If introduced, MDR charges will apply only to a limited set of merchant transactions above a certain threshold and at a nominal rate," it said.
The government further added that such charges would be significantly lower than the MDR applicable to debit or credit card transactions.
The clarification comes amid debate over a recent amendment to the Payment and Settlement Systems Act, 2007, with concerns being raised about the possibility of charges being imposed on UPI users.
In addition, the government said the amendment is an enabling provision aimed at ensuring the long-term sustainability, technological development and resilience of the UPI ecosystem.
The proposed changes are part of the Taxation and Other Laws (Amendment) Bill, 2026.
Once Parliament passes the Bill, the 'UPI and Services Steering Committee' -- headed by the National Payments Corporation of India (NPCI) -- will decide on the MDR, if any, the government said.
It said UPI's rapidly increasing transaction volumes require continued investment in cybersecurity, fraud prevention and technology infrastructure.
The government also said a sustainable revenue model is needed to encourage more companies to expand their operations in the UPI ecosystem and reduce reliance on subsidies.
UPI processed 2,366 crore transactions worth Rs 29.9 lakh crore in July 2026 alone, according to the ministry.
Moreover, the payment system is currently live in 11 foreign countries, while several other countries have expressed interest in adopting the technology.
The government rejected reports suggesting that external influences were driving the policy changes, describing such claims as unfounded and misleading.
— IANS
Reader Comments
Finally some clarity! I was worried that they might start charging for simple money transfers between friends or paying the local vegetable vendor. The threshold approach makes sense - let bulk merchants who benefit from high volume pay a small fee. But I hope the government keeps a very close watch on the rates decided by this steering committee. We don't want a repeat of the credit card MDR situation where the burden eventually falls on consumers.
As a small business owner running a boutique in Jaipur, I rely on UPI for about 80% of my daily sales. Most of my customers are young college students or tourists making purchases under ₹2000. If they impose even a nominal MDR on businesses like mine, it could eat into my already tight margins. I'm glad they're keeping it limited to larger transactions above a threshold. Hope they set that threshold high - maybe ₹5000 or more - to truly protect small merchants.
As someone who spent years working in Indian fintech, this is a sensible middle ground. The government needs to balance the no-cost model that made UPI so popular with the sustainability of the ecosystem. The July numbers are staggering - 2,366 crore transactions! Running that infrastructure securely isn't free. A nominal fee on big-ticket merchant transactions while keeping everything else free seems fair. The key will be transparency in how the steering committee sets these rates.
I appreciate the government's clarification, but I'm still cautious. The last time they said something was "enabling and not mandatory," we later got the controversial laws. The proposed Bill and the steering committee's power sound okay in principle, but we need concrete guarantees in the law itself that there will be no service charge on consumer-to-consumer and small merchant transactions. Otherwise, it's just a promise that can change later. Transparency is key here, especially after the telecom and electricity billing issues we've faced.
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.