The Centre clarified that UPI payments will remain free for consumers and person-to-person transactions, while any future merchant MDR would apply only to limited transactions above a threshold.
New Delhi: The Government of India has clarified that UPI transactions will remain free for consumers, seeking to address concerns surrounding the recent amendment to the Payment and Settlement Systems Act (PSS Act).
The government said the proposed changes should not be interpreted as an immediate move to impose charges on ordinary UPI users. According to the clarification, Person-to-Person (P2P) transactions will continue to be free, while any future Merchant Discount Rate (MDR) would apply only to a limited category of merchant transactions above a specified threshold.
The Centre has categorically stated that consumers making payments through UPI will not be charged transaction fees.
All P2P UPI transactions will also continue to remain free.
For merchants, the government said any MDR, if introduced, would be nominal and threshold-based, rather than being imposed universally across all UPI transactions. It added that the proposed rates would remain substantially lower than MDRs applicable to debit and credit card transactions.
The government said the exact framework, if required, would be decided by the UPI and Services Steering Committee headed by NPCI, after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, which proposes amendments to Section 10A of the PSS Act, 2007.
The government said the amendment is an enabling provision intended to support the long-term sustainability and resilience of India's digital payments infrastructure.
UPI has witnessed exponential growth in transaction volumes, requiring continuous investments in cybersecurity, fraud prevention, technology upgrades and payment infrastructure.
The government also said a sustainable revenue framework could encourage more companies to participate in the digital payments ecosystem and increase competition.
The government also rejected reports suggesting that external influences were behind the proposed policy changes, describing such claims as "unfounded" and "misleading".
It pointed out that UPI was introduced in 2016 and subsequently made free for merchants and citizens from January 2020.
The Centre said UPI's growth demonstrated that the digital payments platform was a product of India's own technological and policy ecosystem.
Since its launch in 2016-17, UPI has transformed India's digital payments landscape and expanded access to real-time payments across urban, rural and semi-urban areas.
According to the government, UPI processed 2,366 crore transactions worth Rs. 29.9 lakh crore in July 2026 alone, making it the world's largest real-time payment system.
The platform is currently live in 11 foreign countries, while several other nations have expressed interest in adopting or integrating with the technology.
The Centre said India is entering the next phase of digital payments growth, with further expansion expected across rural and semi-urban markets.
It said the UPI ecosystem needs to remain financially sustainable while continuing to provide secure, affordable and inclusive payment services.
The government reiterated that UPI will remain free for citizens and that any future MDR would be limited to certain merchant transactions and charged at a nominal rate.
It urged citizens to rely on official information from the Ministry of Finance, Reserve Bank of India and NPCI and avoid forwarding unverified messages about UPI charges.
