Digital Payment / UPI Payments Stay Free, Govt Clarifies amid MDR Debate

New Delhi, Aug 8: The government on Saturday clarified that consumers will not be charged for making payments through the Unified Payments Interface (UPI). It emphasized that all person‑to‑person (P2P) transactions will remain free, while any future merchant discount rate (MDR) will be restricted to select transactions above a specified threshold.

The Finance Ministry stated, “If introduced, MDR charges will apply only to a limited set of merchant transactions above a certain threshold and at a nominal rate.” It further noted that such charges would be significantly lower than those applicable to debit or credit card transactions.

This clarification comes amid debate over amendments to the Payment and Settlement Systems Act, 2007, which raised concerns about possible charges on UPI users. The ministry explained that the amendment is an enabling provision designed to ensure the long‑term sustainability, technological development, and resilience of the UPI ecosystem.

Also read: UPI Payments May No Longer Be Free: What You Must Know

The proposed changes form part of the Taxation and Other Laws (Amendment) Bill, 2026. Once Parliament passes the Bill, the UPI and Services Steering Committee—headed by the National Payments Corporation of India (NPCI)—will decide on MDR, if any.

Officials highlighted that UPI’s rapidly growing transaction volumes demand continued investment in cybersecurity, fraud prevention, and infrastructure. A sustainable revenue model, they said, is essential to encourage more companies to expand operations and reduce reliance on subsidies.

UPI processed 2,366 crore transactions worth ₹29.9 lakh crore in July 2026 alone, according to the ministry. The system is now live in 11 foreign countries, with several others expressing interest.

The government also rejected reports suggesting external influences behind the policy changes, calling such claims “unfounded and misleading.”

(IANS)