The government on Saturday said consumers and small merchants will continue to use Unified Payments Interface (UPI) services free of charge, seeking to dispel concerns over possible transaction fees following Parliament’s move to amend the Payment and Settlement Systems Act, 2007.
The Finance Ministry said any Merchant Discount Rate (MDR), if introduced, would apply only to a limited category of merchant transactions above a specified threshold and would be nominal.
"They will apply only to a limited set of merchant transactions, above a certain threshold, at a nominal rate, far lower than debit or credit card MDRs," the ministry said in a statement.
The clarification comes two days after the Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026, which seeks to amend the Payment and Settlement Systems Act to enable the government to permit banks and other payment service providers to levy charges on UPI and other notified electronic payment modes.
"Once the 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 on the MDR, if any," the ministry said.
The government said the amendment is an enabling provision aimed at ensuring the long-term sustainability, technological advancement and resilience of UPI, and does not amount to an immediate decision to impose charges on ordinary users.
The ministry said UPI’s rapidly increasing transaction volumes require continuous investments in cybersecurity, fraud prevention and digital infrastructure. It also stressed the need for greater competition and a sustainable revenue model to support the next phase of expansion.
"Reliance on subsidies alone is not viable for the next wave of growth," it said, adding that a balanced framework was needed to keep UPI "robust, inclusive, and future-ready."
Rejecting suggestions that external pressure influenced the policy change, the government said such claims were "unfounded, completely false and misleading."
It said UPI was introduced in 2016 and has remained free for citizens and merchants since January 2020, becoming the world's largest real-time interoperable payment system.
The government said the amendment should be viewed as part of its broader effort to keep India's digital payments infrastructure sustainable, competitive and capable of supporting the country's expanding digital economy.
"UPI is India's own innovation, and the government remains committed to keeping it free for citizens while ensuring its sustainability for decades to come," it said.
The ministry said expanding UPI into rural and semi-urban areas while maintaining its global competitiveness would require the ecosystem to become self-sustainable and affordable.
Since its launch in 2016-17, UPI has become a key component of India's digital economy and is now the world's largest real-time payment system.
According to the government, UPI processed 2,366 crore transactions worth Rs 29.9 lakh crore in July 2026 alone. The payment platform is currently live in 11 foreign countries, with several others expressing interest.
The government described UPI as a "national achievement built by Indians, for Indians" and said it would continue to support its growth.
It also urged citizens to rely only on information issued by the Finance Ministry, the Reserve Bank of India and NPCI, and avoid forwarding unverified messages about UPI charges.
(With inputs from PTI)
