No UPI Charges For Users, But Nominal MDR May Apply To Select Merchant Payments: Government
· Free Press Journal
UPI payments will remain free for consumers and the vast majority of merchant transactions, the Centre clarified, seeking to allay concerns over the levy of charges on such transactions following the passage of a Bill to amend the Payment and Settlement Systems Act, 2007.
Nominal MDR may apply to select transactions
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The government, however, left the door open for a nominal Merchant Discount Rate, which will be applicable as and when charges are introduced. The finance ministry said in a statement that such charges will apply only to a limited set of merchant transactions, above a certain threshold, at a nominal rate, far lower than debit or credit card MDRs. The clarification comes two days after the Lok Sabha passed a Bill to amend the Payment and Settlement Systems Act, 2007, which authorises the government to permit banks and other service providers to levy charges on payments made through UPI and other notified electronic payment modes.
UPI Steering Committee to decide on rate and threshold
The ministry said that once Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, which proposes to amend Section 10A of the Payment and Settlement Systems Act, 2007, the UPI and Services Steering Committee headed by NPCI will decide on the MDR, if any. This means neither the rate nor the transaction threshold for a potential merchant MDR has been finalised yet.
UPI transactions continue to set records
The Centre said the amendment should be seen as part of an effort to make India's digital payments infrastructure sustainable while allowing UPI to expand further, particularly in rural and semi-urban areas. It reiterated that UPI would remain free for citizens and that any future MDR would be nominal and restricted to a limited set of merchant transactions. The government noted that UPI has grown into the world's largest real-time payment system, processing 2,366 crore transactions worth Rs 29.9 lakh crore in July 2026 alone, and is now live in 11 foreign countries, with many other countries showing interest. The ministry also reminded citizens to rely only on official information from the Ministry of Finance, the Reserve Bank of India and NPCI, and not to forward unverified messages.