The government on Saturday allayed fears over the charges on Unified Payments Interface (UPI) transactions for end users, stating that the transactions will not attract any extra charges for users and small merchants. The Finance Ministry also stated that the vast majority of transactions will also remain free for the merchants.
However, a nominal Merchant Discount Rate (MDR) will be applicable for the merchants as and when the charges are introduced. The Bill to amend the Payment and Settlement Systems Act, 2007 was passed in the Lok Sabha on August 6. As per a statement from the finance ministry, no transaction charges will be levied on consumers for making payments. All person-to-person transactions will stay free of charge. The statement mentioned that a nominal MDR will be "applied only to a limited set of merchant transactions", which are above a certain threshold. They will be much "lower than debit or credit card MDRs", it added.
Vast majority of merchant transactions to be free: FM
The finance ministry further stated that the "vast majority of the transactions will remain free of charge for merchants on UPI", adding that the "MDR, if introduced, will only be threshold-based and not blanketly levied to all". It stated that once the Taxation and Other Laws (Amendment) Bill, 2026, gets a green light from Parliament, "the 'UPI and Services Steering Committee' headed by NPCI will decide on the MDR, if any." The Taxation and Other Laws (Amendment) Bill, 2026, proposes to amend Section 10A of the Payment and Settlement Systems Act, 2007.
Why was the amendment brought?
The ministry further detailed that the rationale behind introducing the amendment to the Payment and Settlement Systems Act (PSS Act) was to enable the "provision designed to ensure UPI’s long-term sustainability, technological advancement, and resilience against emerging risks." It added that the "system requires significant and continuous upgrades in cybersecurity, fraud prevention, and infrastructure" due to the vast increase in transaction volumes. The ministry also reasoned that the amendment to it being "necessary to increase competition by encouraging more companies to expand their operations, which requires a self-sustaining revenue model" and that it aims to mitigate "reliance on subsidies only", which it said "is not viable for the next wave of growth". It highlighted that a "balanced framework" is needed in order to "ensure that UPI remains robust, inclusive, and future-ready."
Inevitable that charges won't be passed to users: Jairam Ramesh
Meanwhile, Congress MP Jairam Ramesh had recently hit out at the government over the amendment, claiming that the merchant charges will be passed to the users in the end. "Merchant Discount Rate (MDR) applies only to merchants and not to customers, " Ramesh had said in a social media post. "This is misleading. MDR is charged to merchants, but it is inevitable that they pass transaction costs on to consumers through higher prices or differential pricing - just as they do with credit and debit card payments. Moreover, "merchants" include medium and small businesses, kirana stores, and even street vendors, the very backbone of UPI adoption, " he added. The Congress leader also claimed that it will lend support to banks and fintechs "to invest more in infrastructure, innovation, and security."
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