Payments Council backs UPI merchant charges, says users, small businesses will remain exempt

The government announced on Saturday that consumers utilizing UPI will not incur any transaction fees, while any proposed merchant discount rate (MDR) will only affect a select group of merchant transactions exceeding a certain threshold. "All Person-to-Person transactions will continue to be free of charge," the government affirmed.

Furthermore, the majority of merchant transactions will remain free on UPI. If MDR is implemented, it will be triggered by specific transaction thresholds and at a nominal rate, significantly lower than traditional debit or credit card MDRs. This proposal, part of an amendment to the Payment and Settlement Systems Act (PSS Act), aims to ensure UPI's long-term viability, technological progress, and resilience against emerging risks.

The amendment is set to be passed through the Taxation and Other Laws (Amendment) Bill, 2026, which will be reviewed by the UPI and Services Steering Committee, led by NPCI. The government's decision to implement this framework stems from the surge in UPI transaction volumes, necessitating continuous enhancements in cybersecurity, fraud prevention, and infrastructure.

Additionally, the move is driven by the need to encourage more companies to enter the market, fostering healthy competition and ensuring a sustainable revenue model. UPI has processed 2,366 crore transactions valued at ₹29.9 lakh crore in July 2026 alone, with the platform now operational in 11 foreign countries and attracting interest from other nations.

The government firmly dismissed rumors of external pressures influencing these policy changes, labeling them as "unfounded, completely false, and misleading." It reiterated that UPI has been free for both merchants and citizens since January 2020.