HighLights
  1. Users will not be charged for UPI transactions.
  2. MDR, if any, for high-value merchant transactions only.
  3. Routine payments like groceries and fares remain unaffected.

Concerns grew among UPI users after the Lok Sabha passed a bill allowing banks to levy fees on merchants for digital payments. The decision sparked widespread speculation that consumers would soon face charges on their routine payments.

The government on Saturday cleared the air, confirming that Unified Payments Interface (UPI) transactions will remain free for users.

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UPI Payments To Remain Free For Users

In a press release, the Ministry of Finance clarified that users will not be charged for making UPI payments and all Person-to-Person (P2P) transactions continue to remain free.

The ministry said that even if a Merchant Discount Rate (MDR) is introduced in the future, it will apply only to a limited category of merchant transactions above a certain threshold. Furthermore, any prospective fee will be levied at a nominal rate, significantly lower than debit and credit card MDRs.

Govt May Permit Banks To Levy 0.25%-0.4% MDR On Select UPI Payments: Report

According to a Times of India report, the government may permit banks and payment service providers to levy a nominal MDR of 0.25 per cent to 0.4 per cent on business-related UPI transactions exceeding Rs 2,000.

As this fee will be levied on commercial transactions rather than consumers, routine payments, such as buying groceries, purchasing milk and vegetables, or paying auto-rickshaw and taxi fares, will remain unaffected.

PSS Amendment To Support Long-Term Sustainability Of UPI, Not Charge Users

The government clarified that recent amendments to the Payment and Settlement Systems (PSS) Act, 2007 have been misinterpreted as a proposal to levy fees on regular users. Instead, the amendment is an enabling provision aimed at supporting UPI's long-term sustainability while strengthening its technological capabilities and resilience against emerging cyber risks.

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To reassure the public, the government confirmed that the vast majority of merchant transactions will remain completely free. Any MDR, if introduced, will be threshold-based rather than applied across all.

Furthermore, the NPCI-chaired "UPI and Services Steering Committee" will evaluate whether to levy any MDR only after Parliament officially passes the Taxation and Other Laws (Amendment) Bill, 2026, which proposes changes to Section 10A of the Payment and Settlement Systems Act, 2007.

(With Inputs From Agencies)


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