UPI to Remain Free for Citizens, Govt Clarifies; Any Future MDR to Be Limited to Merchant Transactions
New Delhi, Aug 8 (TNT): The Government of India on Saturday clarified that UPI payments will remain free for citizens, amid concerns over the proposed amendment to the Payment and Settlement Systems Act, 2007, and said any Merchant Discount Rate (MDR), if introduced, would apply only to a limited set of merchant transactions.
The government said Person-to-Person (P2P) transactions would continue to remain free, while consumers would not be charged for making payments through UPI.
It said any future MDR would be applicable only to merchant transactions above a specified threshold and at a nominal rate, significantly lower than the MDR charged on debit and credit card transactions.
The vast majority of merchant transactions on UPI would continue to remain free, with any MDR being threshold-based and not a blanket charge, it said.
The clarification comes against the backdrop of debate over the proposed Taxation and Other Laws (Amendment) Bill, 2026, which seeks to amend Section 10A of the Payment and Settlement Systems Act, 2007.
The government said the proposed amendment was an enabling provision aimed at ensuring the long-term sustainability, technological advancement and resilience of India’s digital payments infrastructure and did not itself impose charges on ordinary UPI users.
Once Parliament passes the Bill, the UPI and Services Steering Committee headed by NPCI would decide on MDR, if any, the government said.
It said the exponential growth in UPI transactions had created a need for continuous investment in cybersecurity, fraud prevention and payment infrastructure.
The government also said a sustainable revenue model was necessary to encourage more companies to participate in the ecosystem and expand competition, while ensuring that UPI remained affordable and inclusive.
Rejecting reports that external influences were driving the proposed policy changes, the government termed such claims “unfounded, completely false and misleading.”
It said UPI was an Indian innovation and pointed out that the government had kept the platform free for citizens and merchants since January 2020.
Since its launch in 2016-17, UPI has evolved into the world’s largest real-time payment system, processing 2,366 crore transactions worth Rs 29.9 lakh crore in July 2026, according to the government.
UPI is currently operational in 11 foreign countries, while several other countries have expressed interest in the payment system.
The government said the next phase of UPI’s growth would focus on expanding its reach in rural and semi-urban areas and ensuring that the payment ecosystem remains secure, affordable, competitive and sustainable.
It reiterated that UPI would remain free for citizens and there would be no charges on everyday consumer transactions, while any future MDR would be nominal and restricted to a limited category of merchant transactions.
The government advised citizens to rely on official information issued by the Ministry of Finance, Reserve Bank of India and NPCI and avoid circulating unverified claims regarding UPI charges.
TNT KS
