Government bars charges on UPI payments up to ₹2,000, clarifies MDR for certain merchants

The government has clarified the rules around charges on digital payments. In recent days, there have been concerns over whether recent changes to the Payment and Settlement Systems Act, 2007, could eventually result in charges for UPI users in India. The latest notification, issued by the Ministry of Finance on Monday, reveals that consumers will not be charged for using UPI, while any future merchant discount rate (MDR) would apply only to select transactions.

Unified Payments Interface (UPI) has become one of India’s most widely used digital payment methods, allowing users to complete transactions instantly through QR codes and mobile applications. However, discussions around possible UPI charges have raised questions about whether consumers may eventually have to pay for larger payments.The government has clarified that UPI transactions up to ₹2,000 will not attract any direct or indirect charges. According to a Finance Ministry notification issued on September 14, banks and payment system providers cannot impose fees on these transactions. RuPay debit card payments have also been included under the protected electronic payment modes.Centre Prohibits Banks, System Providers From Charging For UPI Transactions Up To ₹2,000 No consumer fee announced for high-value UPI paymentsThe clarification does not mean that consumers will automatically be charged when they make UPI payments above Rs 2,000.Recent changes to the Payment and Settlement Systems Act provide a framework under which charges could be introduced in specific circumstances. The government has previously indicated that any Merchant Discount Rate (MDR) would apply only to certain merchant transactions above a specified threshold, while consumers would not be charged for making UPI payments.Therefore, Rs 2,000 should not be viewed as a new ceiling for free UPI transactions. There is currently no government-notified consumer fee that applies simply because a UPI payment exceeds this amount.MDR is a fee paid within the payment ecosystem for processing digital transactions. Industry discussions have suggested that a nominal rate of around 0.25%-0.4% could apply to selected merchant payments, although no such rate has been officially announced. UPI expansion drives need for sustainable infrastructureThe debate over MDR comes as UPI usage continues to expand rapidly. The number of banks offering UPI services increased from 44 in FY2016-17 to 741 by July 2026, while monthly transactions touched a record 2,366 crore in July 2026.Authorities are also working on improving digital payment access in areas with weak internet connectivity through offline UPI solutions.

The Central government has prohibited banks and system providers from imposing charges on UPI transactions of up to Rs 2,000.Charges prohibited under lawAs per Section 10A of the Payment and Settlement Systems Act, 2007 (51 of 2007), the Central Government prohibits banks and system providers from imposing, directly or indirectly, any charges on a person making or receiving payments using debit cards powered by RuPay and UPI transactions up to Rs 2,000, as per the Ministry of Finance.MDR proposal for larger transactionsIn August, the government opened the door to introducing a nominal Merchant Discount Rate (MDR) on a limited set of UPI merchant transactions above a certain threshold, while assuring that consumers and person-to-person payments will continue to remain free.₹60 Lakh Government Wheat ‘Goes Missing’ In UP, 228 Tonnes Unaccounted For At Two Procurement Centres The government had said the amendment should be seen as part of its broader effort to make India's digital payment infrastructure sustainable, competitive and capable of supporting the country's expanding digital economy.Ministry rejects external influence claimsThe Ministry had also rejected reports suggesting that external influences were behind the proposed policy changes, calling such claims "unfounded, completely false and misleading."(Except for the headline, this article has not been edited by FPJ's editorial team and is auto-generated from an agency feed.)