The government clarified that users will not be charged for making payments through the Unified Payments Interface (UPI), while a merchant discount rate (MDR) could be introduced for a limited number of transactions above a specified threshold. The Finance Ministry said all person-to-person (P2P) UPI transactions would remain free and there would be no blanket MDR on merchants.
“If introduced, MDR charges will apply only to a limited set of merchant transactions above a certain threshold and at a nominal rate,” the ministry said.
It added that any such charges would be significantly lower than the MDR currently applicable to debit and credit card transactions.
The clarification comes amid concerns over a recent amendment to the Payment and Settlement Systems Act, 2007, with reports suggesting that the proposed changes could lead to charges being imposed on UPI users.
The government said the amendment is an enabling provision aimed at ensuring the long-term sustainability, technological development and resilience of the UPI ecosystem.
The proposed changes are part of the Taxation and Other Laws (Amendment) Bill, 2026. Once Parliament passes the Bill, the ‘UPI and Services Steering Committee’, headed by the National Payments Corporation of India (NPCI), will decide whether an MDR should be introduced and, if so, the applicable rate.
The Finance Ministry said UPI’s rapidly rising transaction volumes require continued investment in cybersecurity, fraud prevention and technology infrastructure. It also said a sustainable revenue model would help encourage more companies to expand their operations in the UPI ecosystem and reduce reliance on government subsidies.
UPI processed 2,366 crore transactions worth Rs 29.9 lakh crore in July 2026 alone, according to the ministry. The payment system is currently live in 11 foreign countries, while several others have expressed interest in adopting the technology.
The government also rejected reports that external influences were driving the proposed policy changes, calling such claims “unfounded and misleading”.
(With IANS inputs)
