The Government of India has clarified that UPI users will not have to pay any charges for making payments. It said all person-to-person (P2P) transactions will continue to remain free.
The government also stated that if Merchant Discount Rate (MDR) charges are introduced in the future, they will apply only to a limited category of merchant transactions above a certain threshold. The charges, if imposed, will be at a nominal rate and much lower than those applied to debit or credit card payments.
According to the government, the vast majority of merchant transactions on UPI will continue to remain free. Any future MDR would be threshold-based and not applied across all transactions.
Parliament to decide framework for MDR
The government said that after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, which proposes changes to Section 10A of the Payment and Settlement Systems Act, 2007, the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), will decide whether any MDR should be introduced.
Why the Payment and Settlement Systems Act is being amended
The government said there has been confusion about the recent amendment to the Payment and Settlement Systems (PSS) Act, with some reports suggesting it could lead to charges for ordinary users.
It clarified that the amendment is only an enabling provision aimed at ensuring UPI’s long-term sustainability, technological development and ability to deal with future risks.
Rising transaction volumes need stronger infrastructure
According to the government, the rapid growth of UPI has increased the need for continuous investment in cybersecurity, fraud prevention and payment infrastructure.
It said greater competition is also needed in the digital payments sector, which requires a sustainable revenue model that encourages more companies to expand their operations.
The government added that relying solely on subsidies is not a practical solution for future growth. A balanced framework is needed to keep UPI strong, inclusive and prepared for future challenges.
Government rejects claims of external pressure
The government dismissed reports suggesting that policy changes were influenced by external pressure.
It said such claims are completely false and misleading. The government pointed out that if external influence had played a role, India would not have introduced UPI in 2016 or kept it free for both merchants and citizens since January 2020 while helping it become the world’s largest real-time interoperable payment system.
Focus on a sustainable digital payments ecosystem
The government said the amendment should be viewed as part of its broader effort to ensure India’s digital payments infrastructure remains sustainable, competitive, innovative and capable of supporting the country’s fast-growing digital economy.
It reiterated that UPI is an Indian innovation and that the government remains committed to keeping it free for citizens while ensuring its long-term sustainability.
UPI enters next phase of growth
The government said India is now entering the next phase of digital payments growth.
To expand UPI further in rural and semi-urban areas and maintain competitiveness, the ecosystem must become self-sustaining and affordable.
The amendment to the PSS Act is intended to help ensure that UPI continues to grow as a secure, affordable, inclusive and globally recognised payment system.
UPI processed 2,366 crore transactions in July
Launched in 2016-17, the Unified Payments Interface (UPI) has transformed India’s digital economy and become one of the most inclusive payment systems in the world.
According to the government, UPI is now the world’s largest real-time payment system. In July 2026 alone, it processed 2,366 crore transactions worth ₹29.9 lakh crore.
UPI is currently available in 11 countries, while several others have expressed interest in adopting the system.
Government’s key assurances
The government reaffirmed that:
- UPI will remain free for citizens.
- Everyday transactions by citizens will not attract charges.
- Any future MDR will be nominal and limited to certain merchant transactions.
- UPI will continue to be India’s flagship digital payments innovation and expand globally.
- The government urged citizens to rely only on official information from the Ministry of Finance, the Reserve Bank of India and NPCI, and not to share unverified messages.
