- Person-to-person UPI transactions will remain free for users, the government clarified
- Any future MDR on UPI will apply only to select merchant transactions above a threshold
- MDR rates will be nominal and lower than those for debit or credit card payments
The government has clarified that person-to-person (P2P) UPI transactions will continue to remain free, amid a debate over the possible introduction of a merchant discount rate (MDR) on UPI payments.
The clarification from the Ministry of Finance comes after recent changes to the Payment and Settlement Systems Act triggered concerns that UPI users could eventually be charged for making payments.
No Charges For UPI Users
The government has categorically said that consumers will not face transaction charges on UPI. All P2P transactions will continue to be free of charge, while UPI will remain free for citizens for everyday transactions.
The government also clarified that any MDR, if introduced in the future, would apply only to a limited set of merchant transactions. Such charges would be imposed above a certain threshold and at a nominal rate, significantly lower than MDRs applicable to debit or credit cards.
The majority of merchant transactions on UPI are also expected to remain free. Any future MDR would be threshold-based rather than a blanket charge.
ALSO READ: UPI MDR: Who Will Pay? Here's What The New Rules Mean For Customers
Who Will Decide On MDR?
The government said that if Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, proposing changes to 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 government said the proposed framework is aimed at making UPI financially sustainable as transaction volumes rise and spending on cybersecurity, fraud prevention and infrastructure increases.
UPI processed 2,366 crore transactions worth Rs 29.9 lakh crore in July 2026, according to the government. It is also live in 11 foreign countries.
The government reiterated that UPI will remain free for citizens, while any future MDR would be limited to select merchant transactions.
ALSO READ: Who Bears The Cost Of UPI Payments? The MDR Debate Explained
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