UPI payments of up to Rs 2,000 remain free; no clarity yet on MDR for higher payments

The government has directed banks and payment system providers not to levy charges on Unified Payments Interface (UPI) transactions of up to Rs 2,000 or on payments made through RuPay debit cards.

However, the government has not specified whether charges would be applicable to transactions above Rs 2,000, to be paid by merchants. So far, there has been no charge on UPI transactions, irrespective of the amount.

No MDR on small payments

As per a gazette notification dated September 14, no bank or system provider would impose, whether directly or indirectly, any charge on a person making or receiving a payment through RuPay debit card or UPI transaction of up to Rs 2,000.

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The notification follows an amendment to Section 10 A of the Payment and Settlement Systems Act, 2007, which provides an enabling framework for imposing a Merchant Discount Rate (MDR) on payments through UPI and other notified electronic payment modes.

The amendment Bill was passed by Parliament during the Monsoon Session, which concluded on August 13, 2026. Following the passage of the Bill, the government had said the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), would decide on the MDR rates.

Govt cites rising infra cost

Explaining the rationale for imposing charges, the government, in a statement, said, with exponential transaction volumes, the system requires significant and continuous upgrades in cybersecurity, fraud prevention, and infrastructure.

Charges were required for market expansion and self- sustainability, it had said. It is necessary to increase competition by encouraging more companies to expand their operations, which requires a self-sustaining revenue model, it had said.

Reliance on subsidies alone is not viable for the next wave of growth, it said, adding that a balanced framework is required to ensure that UPI remains robust, inclusive, and future-ready.

UPI scales up globally

UPI is operated by the National Payments Corporation of India (NPCI), an initiative of the Reserve Bank of India (RBI) and the Indian Banks' Association.

Also read | UPI transactions to remain free for users, fee only on select merchant deals: Govt

It runs real-time payments between individuals nd enables customers to make payments directly to merchants while making purchases. As far as overseas presence is concerned, UPI is now accepted in 11 countries, with Uzbekistan being the latest entry.

The other countries where UPI is accepted are Singapore, the United Arab Emirates, France, Mauritius, Nepal, Bhutan, Qatar, Sri Lanka, Cambodia, and Greece.

UPI, launched on August 25, 2016, has transformed India's digital payments landscape, with transaction value surging from Rs 0.07 lakh crore in FY17 to around Rs 314 lakh crore in FY26, a more than 4,000-fold increase over the decade.

(With agency inputs)