UPI Payments to Stay Free for Users, Govt Says Merchant Charges Could Be Limited

New Delhi — The government has clarified that people will not have to pay any charges for making payments through the Unified Payments Interface (UPI), even as a limited merchant discount rate (MDR) could be introduced for certain high-value transactions.

The Finance Ministry said person-to-person (P2P) UPI transactions will continue to remain completely free and there will be no blanket MDR for merchants.

"If introduced, MDR charges will apply only to a limited set of merchant transactions above a certain threshold and at a nominal rate," the ministry said.

It added that any such charges would be significantly lower than those currently applicable to debit and credit card transactions.

The clarification comes amid concerns over a recent amendment to the Payment and Settlement Systems Act, 2007. There had been apprehension that the proposed changes could eventually lead to charges being imposed on ordinary UPI users.

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The government said the amendment is only 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. If Parliament approves the Bill, the 'UPI and Services Steering Committee', headed by the National Payments Corporation of India (NPCI), will decide whether an MDR should be introduced and, if so, how it would be structured.

The Finance Ministry said UPI's rapidly expanding transaction volumes require sustained investment in cybersecurity, fraud prevention and technology infrastructure. It also stressed the need for a sustainable revenue model to encourage more companies to invest in and expand within the UPI ecosystem, while reducing its dependence on government subsidies.

UPI recorded 2,366 crore transactions worth Rs 29.9 lakh crore in July 2026 alone, according to the ministry.

The digital payment platform is currently operational in 11 countries outside India, while several other nations have also shown interest in adopting the technology.

The government also dismissed reports that external influences were behind the proposed policy changes, calling such claims "unfounded and misleading."

With inputs from IANS