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UPI payments to remain free for users, MDR may apply to select merchants: Centre

hellohimachalse@gmail.com 08 Aug 2026 2 hours ago

New Delhi: The government has said consumers will not face charges for making payments through the Unified Payments Interface. All person-to-person transactions will also continue to remain free.The clarification came amid concerns that changes to the Payment and Settlement Systems Act, 2007, could lead to charges on regular UPI payments.

The government said a nominal merchant discount rate, or MDR, could apply only to a limited category of merchant transactions above a fixed threshold. It said the proposed rate would remain much lower than the MDR charged on debit and credit card payments.

Most transactions remain free

The government said most UPI transactions would remain free for merchants. It ruled out a blanket MDR on all merchant payments and said any future charge would depend on a transaction threshold. The Taxation and Other Laws (Amendment) Bill, 2026, proposes changes to Section 10A of the Payment and Settlement Systems Act. After Parliament passes the Bill, the NPCI-led UPI and Services Steering Committee will decide whether to introduce an MDR and determine its structure.

Amendment aims at sustainability

The government described the proposed amendment as an enabling provision meant to support UPI’s long-term sustainability, technological development and protection against new risks. It said the rapid rise in transaction volumes requires regular investment in cybersecurity, fraud prevention and payment infrastructure.

The Centre also wants more companies to expand their operations in the digital payments sector. It said this requires a self-sustaining revenue model because subsidies alone cannot support the next phase of growth. The government rejected reports that external pressure influenced the proposed policy changes. It said India launched UPI in 2016 and made it free for citizens and merchants from January 2020.

UPI records rapid growth

According to the government, UPI processed 2,366 crore transactions worth Rs 29.9 lakh crore in July 2026 alone. The payment system is also live in 11 foreign countries, while several other nations have expressed interest. The Centre said the next phase would focus on expanding UPI across rural and semi-urban areas while keeping the system secure, inclusive and affordable.

It reaffirmed that citizens would not face charges on everyday transactions. Any future MDR would remain nominal and apply only to selected merchant payments. The government asked citizens to rely on information issued by the Ministry of Finance, the Reserve Bank of India and the National Payments Corporation of India.

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