Payments Council of India assures "UPI will continue to remain free for consumers"
New Delhi, August 7
Amid widespread discussion concerning transaction fees and merchant charges, the Payments Council of India clarified that "UPI will continue to remain free for consumers" and that small merchants will not face charges for accepting digital payments.
"Merchant service charges, where applicable, are commercial arrangements between merchants and payment service providers. They do not mean that consumers pay to use digital payments," PCI posted on X.
Addressing questions regarding the sustainability of the platform, the PCI noted that Unified Payments Interface (UPI) has transformed into the world's largest real-time payment system since its launch in 2016.
Because operating this national payment infrastructure requires continuous investment in technology, cybersecurity, compliance, customer support, fraud prevention, and innovation, these costs are currently borne by ecosystem participants, including banks and payment service providers, to ensure everyday users enjoy a seamless and secure experience.
Clarifying potential cost shifts, the Council emphasised that any merchant service charges, where applicable, are strictly commercial arrangements between larger businesses and payment service providers, meaning consumers will never have to pay out-of-pocket to use digital payments.
Furthermore, small shopkeepers and kirana stores remain fully protected from paying any Merchant Discount Rate (MDR) charges to accept UPI, keeping digital transactions inclusive and accessible for the smallest businesses across India.
The industry body issued this clarification following the passage of the Taxation and Other Laws (Amendment) Bill, 2026, in the Lok Sabha. The legislation, moved by Finance Minister Nirmala Sitharaman and passed by voice vote without discussion, seeks to amend the Payment and Settlement Systems Act, 2007, the Income-tax Act, 2025, and the Finance Act, 2026.
The bill empowers the government to levy a Merchant Discount Rate (MDR) on select electronic payment modes, with a potential MDR of 0.25 per cent to 0.4 per cent on business-directed UPI transactions above Rs 2,000, while leaving person-to-person payments unaffected.
The council emphasised that small shopkeepers and local vendors remain protected from payment acceptance costs.
"Small merchants are not required to pay any charges (MDR) to accept UPI payments. UPI was designed to make digital payments accessible for even the smallest businesses across India, and protecting small merchants remains central to the ecosystem's inclusive growth."
Explaining why conversations surrounding charges have emerged, the council noted the rapid expansion of UPI "has evolved from a new payment platform into the world's largest real-time payment system. As the ecosystem continues to expand, discussions are taking place on how to sustainably support the infrastructure that enables billions of secure transactions every month, while continuing to ensure that consumers and small merchants remain protected."
Regarding the institutional backing and operational costs of the network, the industry body highlighted the multi-sector investments over the last decade.
"For nearly 10 years, banks, payment companies, fintechs, NPCI and RBI have collectively invested in technology, cybersecurity, fraud prevention, innovation and customer support to build one of the safest and most reliable payment systems in the world."
"These investments continue every day to keep UPI secure, resilient and available 24x7."
The council also clarified how operational costs are managed within the system architecture.
"Operating a national payment infrastructure involves continuous investment in technology, fraud prevention, cybersecurity, compliance, customer support and innovation. These costs are currently borne by ecosystem participants including banks and payment service providers who continue to invest so consumers can enjoy a safe, secure and seamless payment experience."
On potential merchant-side service fees, the council reiterated, "Merchant service charges, where applicable, are commercial arrangements between merchants and payment service providers. They do not mean that consumers pay to use digital payments. Across the world, merchant service charges are a standard feature of digital payment ecosystems, while consumers continue to enjoy convenient and secure digital payment experiences."
"UPI has become critical national digital infrastructure used by hundreds of millions of Indians every day."
— ANI
Reader Comments
I'm relieved to hear this. Our kirana wala accepts UPI for even Rs 10 transactions, and he's a small businessman. If they started charging MDR on him, it would hurt his daily earnings. Glad the government and NPCI are thinking about the common man first. 🙏
It's good news that consumers won't pay, but I'm still skeptical about the 0.25-0.4% MDR on larger business transactions. Won't big businesses eventually pass that cost to us? The bill was passed without much discussion too. I hope RBI and NPCI keep a close watch on how this is implemented, especially for small businesses.
As someone who uses UPI daily for everything from chai to groceries, this is reassuring. The fact that they've invested in cybersecurity and fraud prevention for 10 years gives me confidence. UPI is truly India's pride on the global stage! 🇮🇳
Happy to see UPI remains free for consumers. I use it when I visit India for business, and it's remarkable how seamless it is. Keeping small merchants protected is a wise policy decision—it ensures financial inclusion remains at the core.
Good to hear consumers won't pay. But honestly, I'm a bit worried about the lack of discussion in Parliament on such a big policy change. The bill was passed by voice vote without debate—that's concerning. The devil is always in the details. Let's see how the MDR on business transactions actually plays out in practice. Hope they don't hike it later.
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