UPI stays free for users, vast majority of transactions to remain free for merchants as well, says government

Published 9 August 2026 · politics

The government sought to shut down speculation on plans to impose fees on the country's ubiquitous digital payments network, saying on Saturday (August 8, 2026)

The government sought to shut down speculation on plans to impose fees on the country's ubiquitous digital payments network, saying on Saturday (August 8, 2026) that consumers will not have to pay transaction charges for using UPI, while the vast majority of merchant transactions will also remain free. The government said any future merchant discount rate (MDR), if introduced, would apply only to a limited set of merchant transactions above a specified threshold and at a nominal rate, which would be lower than typical debit and credit card MDRs. All person-to-person UPI transactions will continue to be free, it said. The clarification comes after an amendment to the Payment and Settlement Systems Act, 2007, sparked a debate over whether the government was preparing to impose charges on UPI transactions. The proposed change to Section 10A of the law is an "enabling provision" and does not itself impose an MDR, the government said in a statement. If Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, the UPI and Services Steering Committee headed by the Payments Corp. of India (NPCI) will decide on the MDR, if any, according to the government. The government said any future MDR would be threshold-based rather than imposed across all UPI transactions, with the "vast majority" of merchant payments continuing to be free. The proposed framework is aimed at creating a more sustainable revenue model for UPI as transaction volumes surge and the system requires continued investment in cybersecurity, fraud prevention and payment infrastructure, it said.

United Payment Interface, or UPI, has become the world's largest real-time payment system since its launch in 2016-17, processing 2,366 crore transactions worth ₹29.9 lakh crore in July 2026 alone. The platform is now live in 11 foreign countries, with several others expressing interest in adopting or integrating UPI, the government said. The statement 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 through UPI and other notified electronic payment modes. "Once the 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," it said. The recent amendment to the Payment and Settlement Systems Act (PSS Act) has generated a debate, with some misinterpreting it as a move to impose charges on ordinary users, it said, adding, in reality, the amendment is an enabling provision designed to ensure UPI's long-term sustainability, technological advancement, and resilience against emerging risks. Explaining the rationale, the statement said that with exponential transaction volumes, the system requires significant and continuous upgrades in cybersecurity, fraud prevention, and infrastructure. The statement further said that it was required for market expansion and self-sustainability.