The Union government has formally notified that Unified Payments Interface (UPI) transactions up to Rs 2,000 will remain free of charges, settling one part of the ongoing debate over fees in India’s digital payments ecosystem.
The Ministry of Finance issued the notification under Section 10A of the Payment and Settlement Systems Act, prohibiting banks and system providers from imposing any charge, directly or indirectly, on payments made through RuPay debit cards or UPI transactions up to the ₹2,000 threshold.
Clarifying the broader context, Finance Minister Nirmala Sitharaman told the Rajya Sabha last month that the recent amendment to the Act is an “enabling provision” and does not impose any tax or transaction fee on UPI users. She emphasised that no charges would apply to consumers, small merchants, cab drivers, or street vendors. Any fee, if introduced, would be borne by merchants, not customers.
The amendment removes the earlier bar on banks and payment providers charging a Merchant Discount Rate (MDR), reviving discussions on whether nominal fees should apply to larger merchant transactions. MDR is a small fee paid by merchants to banks and payment companies for processing digital payments.
UPI, the world’s largest real‑time retail payment system, processed 24.51 billion transactions worth ₹29.82 lakh crore in August 2026, according to official data. Running such a massive network requires significant investment in technology, cybersecurity, and customer support, costs currently absorbed by banks, fintech firms, and the National Payments Corporation of India (NPCI).
Industry analysts estimate that merchant fees on high‑value UPI transactions could generate Rs 5,000–Rs 10,000 crore annually for the sector. However, the final decision rests with the UPI & Services Steering Committee, led by NPCI, which will determine whether MDR should be introduced and in what form.
For now, the government’s notification ensures that everyday UPI payments up to Rs 2,000 remain completely free for consumers, while the debate over merchant charges continues.
