Bhubaneswar: The Government of India has clarified that UPI payments will remain free for ordinary users, amid growing debate over proposed amendments to the Payment and Settlement Systems Act, 2007 and the possibility of introducing a Merchant Discount Rate (MDR) on certain transactions.
The government categorically stated that consumers making payments through UPI will not be charged transaction fees. Person-to-Person (P2P) transactions will also continue to remain free of charge.
According to the clarification, any MDR introduced in the future would apply only to a limited set of merchant transactions above a specified threshold and would be levied at a nominal rate. The government said such charges would be significantly lower than MDRs generally applicable to debit and credit card transactions.
The government further emphasised that the vast majority of UPI transactions will continue to remain free for merchants. Any future MDR would be threshold-based and would not be imposed uniformly across all transactions.
What the proposed amendment means
The clarification comes in the wake of debate surrounding the Taxation and Other Laws (Amendment) Bill, 2026, which proposes changes to Section 10A of the Payment and Settlement Systems Act, 2007.
The government said the amendment should be viewed as an enabling provision, rather than a move to impose charges on ordinary UPI users.
Once Parliament passes the proposed legislation, the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), will decide whether MDR should be introduced and, if so, determine the applicable framework.
Government cites sustainability and security
The government said the rapid growth of UPI has created the need for continuous investment in cybersecurity, fraud prevention, technological upgrades and payment infrastructure.
It also argued that encouraging greater participation by more companies would help increase competition and innovation in the digital payments ecosystem. According to the government, relying entirely on subsidies to sustain UPI may not be viable as the system enters its next phase of expansion.
The proposed framework, it said, is intended to help create a self-sustaining, competitive and resilient payment ecosystem without placing a financial burden on ordinary citizens.
Government rejects claims of external pressure
The government also rejected reports suggesting that external influences were driving the proposed policy changes, describing such claims as unfounded and misleading.
It pointed to the government’s role in launching UPI in 2016 and maintaining free access for citizens and merchants since January 2020 as evidence of its long-term commitment to the platform.
UPI reaches new milestone
Since its launch in 2016-17, UPI has transformed India’s digital payments landscape and become one of the world’s largest real-time interoperable payment systems.
According to the government, UPI processed 2,366 crore transactions worth ₹29.9 lakh crore in July 2026 alone. The platform is also now operational in 11 foreign countries, while several other countries have expressed interest in adopting or integrating similar systems.
The government described UPI as a national digital innovation built in India, saying it remains committed to expanding the system while ensuring that it remains secure, affordable and inclusive.
Government’s message to citizens
The government reiterated that:
- UPI will remain free for citizens.
- P2P transactions will continue to be free.
- Any future MDR will be nominal and limited to certain merchant transactions above a threshold.
- There will be no blanket MDR on all UPI transactions.
- The future framework will be aimed at ensuring UPI’s long-term sustainability, security and global competitiveness.
The government has urged citizens to rely on information issued by official institutions, including the Ministry of Finance, Reserve Bank of India and NPCI, and to avoid circulating unverified messages about UPI charges.
The government’s position is clear: UPI is to remain free for citizens, while a potential merchant-side revenue framework is being considered to support the payment system’s next phase of growth.
-OdishaAge
