India is a digitally advanced nation when it comes to online money transfer. People are going cashless and doing money transactions through several UPI apps available. With the help of India's Unified Payments Interface, which is being used for almost everyone (from a vegetable seller to an entrepreneur), things have grown simple and smooth for people of all age groups, as it is easy.
However, the zero-fee model is something that the government is eyeing, which has been used for years. As per the recent reports, it was confirmed that the free UPI money transfer might change in the coming time, as the government is reportedly considering bringing changes like enabling certain UPI transaction fees.
Here are a few things you must be aware of- if you avidly make UPI payments:
1. What is the proposed UPI law change?
The government wants to amend the Payment and Settlement Systems Act so that banks can legally charge a Merchant Discount Rate (MDR) on certain digital payments, including UPI. Don’t panic just yet—nothing’s changing overnight. The amendment would just give the government the power to introduce fees if and when it decides it’s necessary.
2. How much could the UPI fee be?
One idea on the table is an MDR between 0.3 per cent and 0.5 per cent for UPI payments over Rs 2,000. The fee would likely hit shop owners with annual sales above Rs 1.5 crore. There is also talk about tying the fee to business size or capping how much can be charged, but nothing’s final.
3. Why is the government considering MDR?
Payment companies say running a zero-fee system is not sustainable—they need some way to make revenue and keep improving digital infrastructure and security. Even a small fee on big-ticket merchant transactions could help the industry grow and stay secure.
4. Who will pay the UPI charge?
Merchants would take the hit, not their customers. Local kirana shops and smaller businesses probably won’t get charged. Merchants already pay fees for card payments, and credit card MDR is usually higher than what’s being proposed for UPI.
5. Will UPI users have to pay?
Do not lose sleep over this. If this goes through, it’s aimed at large businesses and higher-value payments. Only about 5 per cent of UPI transactions are for over Rs 2,000, though these make up about 65 per cent of the total transaction value. Everyday small payments are likely to remain free, unless retailers decide to pass the cost to customers.
UPI is not suddenly becoming expensive for most people. The changes, if they happen, mostly affect bigger transactions at large businesses.
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