The government on Saturday categorically clarified that UPI users will not face any transaction charges, while the vast majority of merchant transactions will also remain free under any future merchant discount rate (MDR) framework.
The clarification comes amid debate over the recent amendment to the Payment and Settlement Systems Act (PSS Act), with the government stressing that the amendment is an enabling provision aimed at ensuring UPI’s long-term sustainability, technological advancement and resilience against emerging risks.
Under the proposed framework, all person-to-person (P2P) UPI transactions will continue to remain free.
The government said any MDR, if introduced in the future, would apply only to a limited set of merchant transactions above a specified threshold and at a nominal rate, significantly lower than the MDR applicable to debit or credit cards.
The vast majority of merchant transactions on UPI will continue to remain free, it said.
NPCI panel to decide MDR
The government said the “UPI and Services Steering Committee”, headed by the National Payments Corporation of India (NPCI), will decide on the MDR, if any, after 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 government said the proposed amendment should not be interpreted as a move to impose charges on ordinary UPI users.
Why the PSS Act amendment?
The government said UPI’s exponential growth has created a need for significant and continuous investments in cybersecurity, fraud prevention and payment infrastructure.
It also said a sustainable revenue model is necessary to encourage more companies to expand their operations in the UPI ecosystem and increase competition.
According to the government, continued reliance on subsidies alone may not be viable for the next phase of UPI’s growth. A balanced framework is therefore required to keep the payment system robust, inclusive and future-ready.
UPI crosses ₹29.9 lakh crore in July
UPI has emerged as the world’s largest real-time payment system since its launch in 2016-17.
The platform processed 2,366 crore transactions worth ₹29.9 lakh crore in July 2026 alone, according to the government.
UPI is currently live in 11 foreign countries, while several other countries have expressed interest in adopting or integrating the payment system.
The government said UPI’s rapid expansion has transformed India’s digital economy and created one of the world’s most inclusive payment ecosystems.
Government rejects ‘external pressure’ narrative
The government also rejected reports suggesting that external influences were driving the policy changes around UPI charges.
It described such reports as “unfounded, completely false and misleading”, pointing out that India introduced UPI in 2016 and made it free for merchants and citizens from January 2020.
The government said UPI is an Indian innovation and reaffirmed its commitment to keeping the platform free for citizens while ensuring its financial and technological sustainability.
Focus on next phase of UPI growth
The government said India is entering the next phase of digital payments growth, with further expansion into rural and semi-urban areas requiring UPI to remain secure, affordable, inclusive and competitive.
It said the proposed amendment to the PSS Act is intended to create a framework that can support UPI’s continued growth while strengthening its resilience and technological capabilities.
The government reiterated that UPI will remain free for citizens, there will be no charges on everyday transactions for users, and any future MDR will be nominal and limited to select merchant transactions.
It urged citizens to rely on official information from the Ministry of Finance, the Reserve Bank of India and NPCI and avoid forwarding unverified messages about UPI charges.