New Delhi: The government on Saturday clarified that consumers will not be charged for making payments through the Unified Payments Interface (UPI), while any future merchant discount rate (MDR) will be limited to select transactions above a specified threshold.
The Finance Ministry said that all person-to-person (P2P) UPI transactions will continue to remain free and there will 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,” it said.
The government further added that such charges would be significantly lower than the MDR applicable to debit or credit card transactions.
The clarification comes amid debate over a recent amendment to the Payment and Settlement Systems Act, 2007, with concerns being raised about the possibility of charges being imposed on UPI users.
In addition, 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 on the MDR, if any, the government said.
It said UPI’s rapidly increasing transaction volumes require continued investment in cybersecurity, fraud prevention and technology infrastructure.
The government also said a sustainable revenue model is needed to encourage more companies to expand their operations in the UPI ecosystem and reduce reliance on subsidies.
UPI processed 2,366 crore transactions worth Rs 29.9 lakh crore in July 2026 alone, according to the ministry.
Moreover, the payment system is currently live in 11 foreign countries, while several other countries have expressed interest in adopting the technology.
The government rejected reports suggesting that external influences were driving the policy changes, describing such claims as unfounded and misleading.
IANS
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