UPI to Remain Free for Consumers, Government Clarifies

Core News & Key Facts

The government has clarified that Unified Payments Interface (UPI) transactions will remain free for consumers, seeking to end speculation that users could soon be charged for making digital payments. The clarification comes amid debate over a recent amendment to the Payment and Settlement Systems Act, 2007, which could create a framework for charges on certain electronic payment transactions.

According to the government, all person-to-person UPI transactions will continue to remain free. It also said that the vast majority of merchant transactions will continue to have no charges. If a merchant discount rate (MDR) is introduced in the future, it would not apply universally. Instead, the government said it would be threshold-based and limited to a selected category of transactions above a specified level.

The Payments Council of India (PCI) has separately reaffirmed that consumers will not be charged for using UPI. It also said small merchants will continue to be able to accept digital payments without transaction charges, while stressing the importance of continued investment in cybersecurity, fraud prevention, infrastructure and technological development.

Context & Statements

The clarification follows the Lok Sabha's passage of a Bill seeking to amend Section 10A of the Payment and Settlement Systems Act, 2007. The government said the proposed amendment is an enabling provision and does not itself impose an MDR on UPI transactions.

If Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, the UPI and Services Steering Committee headed by the National Payments Corporation of India (NPCI) would decide on any MDR, according to the government.

The government said any potential MDR would be nominal and lower than typical debit and credit card MDRs. It argued that a sustainable revenue framework may become increasingly important as UPI transaction volumes continue to rise and the ecosystem requires regular investment in cybersecurity, fraud prevention, infrastructure and innovation.

UPI has expanded significantly since its launch in 2016-17. The government said the platform processed 2,366 crore transactions worth ₹29.9 lakh crore in July 2026 alone. UPI is also now operational in 11 foreign countries, with several other nations showing interest in adopting or integrating the system.

Impact & What's Next

For everyday users, the immediate message is that there will be no new transaction fee for making UPI payments. Person-to-person transfers will remain free, while most merchant payments are also expected to continue without charges.

The government has argued that the proposed framework is intended to support the long-term sustainability of India's digital payments infrastructure rather than introduce a broad-based fee on users. It said the ecosystem needs a balanced revenue model as transaction volumes expand and digital payments reach more rural and semi-urban areas.

The PCI has similarly highlighted the growing need for investment in resilience, security and fraud prevention. The organisation said banks, fintech companies, NPCI and the Reserve Bank of India have continued investing in the technology supporting UPI.

Any future decision on MDR will depend on the proposed legislative framework and the subsequent decision of the UPI and Services Steering Committee. Until then, consumers can continue using UPI without transaction charges, while the government has urged citizens to rely on official information and avoid forwarding unverified messages about UPI fees.