New Delhi: The Government of India has categorically clarified that UPI payments will remain free for citizens, amid recent discussions surrounding proposed amendments to the Payment and Settlement Systems Act, 2007 and the possibility of introducing a Merchant Discount Rate (MDR) on certain UPI transactions.
The government said that consumers making payments through UPI will not face any transaction charges, and all Person-to-Person (P2P) transactions will continue to remain free of charge. It also clarified that if MDR is introduced in the future, it would apply only to a limited set of merchant transactions above a specified threshold and at a nominal rate, which would be significantly lower than the MDR applicable to debit or credit card transactions. The vast majority of UPI transactions will continue to remain free for merchants, with any future MDR being threshold-based rather than a blanket charge.
According to the government, once Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, which proposes to amend Section 10A of the Payment and Settlement Systems Act, 2007, the “UPI and Services Steering Committee” headed by NPCI will decide whether MDR should be introduced and, if so, determine its framework.
The government said the proposed amendment to the Payment and Settlement Systems Act (PSS Act) should not be interpreted as a move to impose charges on ordinary UPI users. It described the amendment as an enabling provision aimed at ensuring the long-term sustainability, technological advancement and resilience of India’s UPI ecosystem against emerging risks.
With UPI transaction volumes growing exponentially, the government said the digital payment system requires continuous investment in cybersecurity, fraud prevention and technological infrastructure. It also said that encouraging more companies to participate in the UPI ecosystem is necessary to increase competition and expand the market, which requires a sustainable revenue model.
The government further stated that continued dependence on subsidies alone would not be viable for the next phase of UPI’s growth. A balanced framework, it said, is required to ensure that UPI remains robust, inclusive, affordable and future-ready.
Addressing what it described as false narratives, the government rejected reports suggesting that external influences were driving the proposed policy changes. It said such claims are “unfounded, completely false and misleading.” The government pointed out that India introduced UPI in 2016 and made it free of charge for both merchants and citizens from January 2020, helping it develop into the world’s largest real-time interoperable payment system.
The government said the proposed amendment should instead be viewed as part of its broader objective of ensuring that India’s digital payment infrastructure remains sustainable, competitive, innovative and capable of supporting the country’s rapidly expanding digital economy.
Since its launch in 2016–17, the Unified Payments Interface (UPI) has transformed India’s digital payments ecosystem. The government said UPI has grown from an experiment in real-time, interoperable payments into a global benchmark and the world’s largest real-time payment system.
In July 2026 alone, UPI processed 2,366 crore transactions worth ₹29.9 lakh crore. The platform is now live in 11 foreign countries, while several other countries have also expressed interest in adopting or integrating UPI.
The government described UPI as a national achievement built by Indians, for Indians, saying that it has promoted, funded and developed the system for a decade and will continue to support its growth.
Looking ahead, the government said India is entering the next wave of digital payments growth, particularly with the expansion of UPI into rural and semi-urban areas. It said the ecosystem must remain self-sustainable and affordable to maintain its global competitiveness and ensure that UPI continues to develop as a secure, affordable, inclusive and globally recognised payment system.
The government has therefore reaffirmed that UPI will remain free for citizens, there will be no charges on everyday transactions by citizens, and any future MDR will be nominal and limited to specific merchant transactions. Citizens have also been advised to rely only on official information issued by the Ministry of Finance, Reserve Bank of India and NPCI, and not to circulate unverified messages regarding UPI charges.
