The Centre has moved to clear the air over a possible introduction of charges on Unified Payments Interface (UPI) transactions, assuring consumers that they will continue to use UPI without paying transaction fees in the vast majority of cases.
The clarification follows the Lok Sabha’s passage of a Bill proposing changes to the Payment and Settlement Systems Act, 2007. The proposed amendment gives the government the power to allow banks and payment service providers to impose charges on UPI and other specified electronic payment systems.
UPI To Remain Free For Consumers
According to the Finance Ministry, consumers will not be charged for using UPI. The government also said most merchant transactions will continue to remain free.
However, a nominal Merchant Discount Rate (MDR) could eventually be introduced for a limited category of merchant transactions crossing a specified threshold.
The proposed charge, if introduced, would be significantly lower than the MDR generally associated with debit and credit card payments.
Importantly, the government has not yet decided either the rate of the proposed MDR or the transaction threshold at which it could apply.
NPCI-Led Panel To Decide MDR
The government said that after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, the UPI and Services Steering Committee headed by the National Payments Corporation of India (NPCI) will determine the details.
This means there is currently no final decision on how much merchants could be charged or which transactions would attract the levy.
The government has maintained that the proposed framework is aimed at strengthening the long-term sustainability of India’s digital payments ecosystem while ensuring that UPI continues to expand, particularly in rural and semi-urban markets.
UPI Records Nearly 24 Billion Transactions In July
The Centre also highlighted the enormous scale of India’s UPI network.
In July 2026 alone, UPI processed 2,366 crore transactions worth ₹29.9 lakh crore, according to the Finance Ministry. The payment system has also expanded beyond India’s borders and is currently operational in 11 countries.
The government urged people to rely on information issued by the Finance Ministry, Reserve Bank of India and NPCI and avoid circulating unverified claims about UPI charges.
For consumers, the key takeaway remains clear: UPI payments are set to remain free, while any future MDR would be limited to select merchant transactions and would be nominal.
