New Delhi: The Government of India clarified that UPI users would not face transaction charges under the proposed changes to the Payment and Settlement Systems Act.
Person-to-Person transactions would also continue without charges. The government said any future Merchant Discount Rate would apply only to a limited set of merchant transactions.
Such charges, if introduced, would remain nominal and threshold based. Moreover, the vast majority of UPI transactions would remain free for merchants.
The clarification followed debate over the proposed amendment to Section 10A of the Payment and Settlement Systems Act, 2007. Officials said the change would support UPI’s long-term sustainability and growth.
According to the government, the amendment would not impose charges on ordinary users. Instead, it would create a framework for possible merchant charges on selected transactions.
The government also stressed that any future MDR would remain far below debit and credit card MDRs. It would not apply across all merchant transactions.
The proposed change still requires parliamentary approval. After Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, the UPI and Services Steering Committee headed by NPCI would decide on the MDR, if any.
The government said UPI’s rapid growth requires continued investment in cybersecurity, fraud prevention and infrastructure. It also said the ecosystem needs greater competition and a sustainable revenue model.
At present, relying only on subsidies would not support the next phase of UPI’s expansion. A balanced framework, therefore, would help keep the payment system secure, affordable and inclusive.
UPI charges and the proposed merchant framework
The government reaffirmed that UPI charges would not apply to consumers. All Person-to-Person payments would continue to remain free.
However, a future MDR could apply to selected merchant transactions above a specified threshold. The rate would be nominal and would apply only to a limited set of transactions.
Importantly, the government said there would be no blanket MDR across the UPI ecosystem. Most merchant transactions would continue without charges.
The government also rejected reports suggesting that external pressure had driven the policy change. It called those claims unfounded, false and misleading.
India introduced UPI in 2016 and made it free for citizens and merchants from January 2020. Since then, the system has become the world’s largest real-time interoperable payment platform.
The government said UPI now needs to prepare for its next phase of growth. Expansion into rural and semi-urban areas remains a key objective.
A self-sustainable and affordable ecosystem would support that expansion, officials said. The proposed amendment was presented as a measure to strengthen UPI against emerging risks.
Since its launch in 2016-17, UPI has transformed India’s digital payment ecosystem. It has also emerged as a global benchmark for real-time payments.
UPI processed 2,366 crore transactions worth ₹29.9 lakh crore in July 2026 alone. The platform is now live in 11 foreign countries.
Several other countries have also shown interest in the payment system. The government described UPI as a national achievement developed and expanded in India.
Government support has helped UPI grow over the past decade. Officials said that support would continue as the system enters its next stage.
Citizens were urged to rely on official information from the Ministry of Finance, the Reserve Bank of India and NPCI. The government also advised people not to forward unverified messages about UPI charges.
