- Banks cannot charge fees on UPI transactions up to Rs 2,000 or RuPay debit card payments
- The Finance Ministry clarified no charges apply to small value digital payments under 2000 Rs
- UPI person-to-person payments will remain free despite possible MDR on higher value merchant transactions
The government has clarified that banks and payment system providers cannot impose direct or indirect charges on UPI transactions of up to Rs 2,000. The protection also covers payments made through RuPay powered debit cards.
The Finance Ministry issued a notification on Monday under the Payment and Settlement Systems Act, 2007, formally specifying UPI transactions up to Rs 2,000 and RuPay debit card payments as electronic modes covered by the no charge provision.
The clarification comes amid concerns that recent amendments to the payments law could eventually result in charges for UPI users. The government has maintained that consumers will not have to pay transaction fees for using UPI.
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Finance Minister Nirmala Sitharaman had earlier said the legislative changes were not aimed at imposing a charge on ordinary UPI payments.
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The government had described the amendment as an enabling framework that could allow a future merchant discount rate (MDR) on selected transactions.
Under the government's broader framework, any future MDR would be limited to certain merchant transactions above a prescribed threshold. Person to person payments would continue to remain free.
The latest notification therefore provides greater clarity for small value digital payments. It means customers making UPI payments of up to Rs 2,000 will not face a direct or indirect transaction charge from banks or system providers.
The move is also significant for India's rapidly expanding digital payments ecosystem. UPI processed 2,366 crore transactions worth Rs 29.9 lakh crore in July 2026, according to the Finance Ministry.
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The government has argued that changes to the legal framework are needed to support UPI's long term sustainability, cybersecurity, fraud prevention and technological expansion.
For consumers, however, the UPI payments up to Rs 2,000 remain free, while any future charges on higher value merchant transactions would depend on separate government notifications.
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