UPI Payments To Remain Free For Users, Govt May Allow Nominal Merchant Fees Later

New Delhi: The Centre on Saturday "categorically stated" that Unified Payments Interface (UPI), users will not have to pay any transaction charges for making payments through UPI, while a nominal Merchant Discount Rate (MDR) could be introduced for a limited set of merchant transactions in the future.

"No Charges for UPI Users. Vast Majority of the Transactions to Remain Free of Charge for Merchants as well. Amendment to the Payment and Settlement Systems Act (PSS Act) an Enabling Provision to Ensure further proliferation of Financial Inclusion, UPI’s Long-Term Sustainability, Technological Advancement, and Resilience Against Emerging Risks...", the Ministry of Finance said.

Lok Sabha passes amendment Bill

The government's clarification comes a day after the Lok Sabha passed a Bill to amend the Payment and Settlement Systems Act, 2007, which authorises the government to permit banks and other service providers to levy charges on payments through UPI and other notified electronic payment modes.

MDR charges on select transactions

The government said that if MDR charges are introduced, they would apply only to select merchant transactions above a specified threshold. The charges would remain nominal and be significantly lower than those levied on debit and credit card payments. It clarified that any MDR on UPI transactions would be threshold-based and would not be imposed across all transactions.

UPI committee to decide MDR

The Centre also said that 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 on the MDR, if any. The Lok Sabha passed the Bill on 6 August.