‘UPI Payments Will Remain Free’: Govt Clarifies MDR Proposal

The government on Saturday clarified that consumers will continue to make Unified Payments Interface (UPI) payments without charges. It said any future merchant discount rate (MDR) would apply only to a limited set of transactions above a specified threshold.

The Finance Ministry said all person-to-person (P2P) UPI transactions will remain free. It also ruled out any blanket MDR on merchants.

If introduced, the charge would apply to select merchant transactions at a nominal rate.

The government said the proposed MDR would remain significantly below rates applicable to debit and credit card transactions.

The clarification follows concerns over a recent amendment to the Payment and Settlement Systems Act, 2007.

The government said the amendment only creates an enabling framework. It aims to support the UPI ecosystem’s long-term sustainability, technological advancement and resilience.

The proposed changes form part of the Taxation and Other Laws (Amendment) Bill, 2026.

After Parliament passes the Bill, the ‘UPI and Services Steering Committee’, headed by the National Payments Corporation of India (NPCI), will determine the MDR, if required.

The government said UPI’s surging transaction volumes demand continued investment in cybersecurity, fraud prevention and technological infrastructure. It added that a sustainable revenue model could encourage more companies to expand within the ecosystem and reduce dependence on subsidies.

According to the Finance Ministry, UPI processed 2,366 crore transactions worth ₹29.9 lakh crore in July 2026 alone.

The payment platform currently operates in 11 foreign countries.

Several other nations have also shown interest in adopting the technology.

The government dismissed claims that external influences prompted the proposed policy changes. It described such allegations as unfounded and misleading.

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