Government bars fees on UPI payments up to Rs 2,000, RuPay debit card payments

On Monday, the Ministry of Finance announced that banks and system providers will no longer be able to charge fees on UPI transactions up to Rs 2,000 and RuPay debit card payments. The government stated that no bank or system provider shall charge a person for using these electronic modes of payment. In 2025-26, only 4% of person-to-merchant UPI transactions exceeded Rs 2,000, accounting for nearly two-thirds of UPI payments by value.

Over 24,000 crore UPI transactions worth Rs 314 lakh crore were made in the same period. The amendment to the Payment and Settlement Systems Act, 2007 removed the exemption for banks from charging any fees on electronic payments under Section 269SU of the Income-tax Act, 1961, which could have led to the imposition of Merchant Discount Rate (MDR) fees on UPI and RuPay debit card payments to large merchants.

However, the government clarified that small value transactions and individual-to-individual payments will remain fee-free. The Finance Ministry highlighted that this amendment aims to ensure UPI's long-term sustainability, technological advancement, and resilience against emerging risks. Banks and payment service providers have argued that the cost of maintaining digital payments infrastructure is increasing, with the Standing Committee on Finance noting that the lack of MDR makes the UPI ecosystem financially unsustainable.

The government had been subsidizing payments of up to Rs 2,000 made to small merchants through an incentive scheme, which was estimated to cost Rs 2,000 crore in the current fiscal year.