UPI to Stay Free for Consumers, Small Merchants as MDR Debate Continues

New Delhi: The Payments Council of India (PCI) has clarified that consumers will continue to use the Unified Payments Interface (UPI) free of charge, while small merchants will also remain exempt from charges for accepting UPI payments.

The clarification comes amid renewed debate over merchant discount rates (MDR) and how to sustainably fund the rapidly expanding digital payments ecosystem in India.

In a post on social media platform X on Friday, PCI said UPI has remained free for consumers since its launch in 2016 and there is currently no proposal to impose transaction charges on individuals using the platform.

“UPI has always been free for consumers since its launch in 2016. Every Indian can continue making instant digital payments without paying any transaction charges,” the industry body said.

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PCI stressed that the ongoing discussion is not about charging consumers, but about finding sustainable ways to support the infrastructure behind a system that now handles billions of transactions every month.

The council also made it clear that small merchants are not required to pay MDR for accepting UPI payments.

“Small merchants are not required to pay any charges (MDR) to accept UPI payments,” PCI said, adding that protecting small businesses remains an important part of UPI’s inclusive growth strategy.

UPI has helped millions of small businesses across India accept digital payments without the costs traditionally associated with electronic payment systems. Keeping the platform accessible to even the smallest merchants has been central to its rapid adoption.

PCI said UPI has grown from a relatively new payment platform into the world's largest real-time payment system. The massive increase in transaction volumes has also created growing requirements for technology upgrades, cybersecurity, fraud prevention and operational resilience.

The industry body said discussions are therefore focused on how to provide long-term support for the payment infrastructure without placing an additional financial burden on consumers or small merchants.

Banks, payment companies, fintech firms, the National Payments Corporation of India (NPCI) and the Reserve Bank of India (RBI) have collectively invested for nearly a decade in developing and maintaining the UPI ecosystem, PCI noted.

With inputs from IANS