UPI stays free for users, vast majority of transactions to remain free for merchants as well: Govt

NEW DELHI: The government sought to shut down speculation on plans to impose fees on the country's ubiquitous digital payments network, saying Saturday that consumers will not have to pay transaction charges for using UPI, while the vast majority of merchant transactions will also remain free.

The government said any future merchant discount rate (MDR), if introduced, would apply only to a limited set of merchant transactions above a specified threshold and at a nominal rate, which would be lower than typical debit and credit card MDRs.

All person-to-person UPI transactions will continue to be free, it said.

The clarification comes after an amendment to the Payment and Settlement Systems Act, 2007, sparked a debate over whether the government was preparing to impose charges on UPI transactions. The proposed change to Section 10A of the law is an "enabling provision" and does not itself impose an MDR, the government said in a statement.

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

The government said any future MDR would be threshold-based rather than imposed across all UPI transactions, with the "vast majority" of merchant payments continuing to be free.

The proposed framework is aimed at creating a more sustainable revenue model for UPI as transaction volumes surge and the system requires continued investment in cybersecurity, fraud prevention and payment infrastructure, it said.

United Payment Interface or UPI has become the world's largest real-time payment system since its launch in 2016-17, processing 2,366 crore transactions worth Rs 29.9 lakh crore in July 2026 alone. The platform is now live in 11 foreign countries, with several others expressing interest in adopting or integrating UPI, the government said.

The statement comes two days after the Lok Sabha passed a Bill to amend the Payment and Settlement Systems Act, 2007, which authorises the government to permit banks and other service providers to levy charges on payments through UPI and other notified electronic payment modes.

"Once the Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, which proposes to amend 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," it said.

The recent amendment to the Payment and Settlement Systems Act (PSS Act) has generated a debate, with some misinterpreting it as a move to impose charges on ordinary users, it said, adding, in reality, the amendment is an enabling provision designed to ensure UPI's long-term sustainability, technological advancement, and resilience against emerging risks.

Explaining the rationale, the statement said that with exponential transaction volumes, the system requires significant and continuous upgrades in cybersecurity, fraud prevention, and infrastructure.

The statement further said that it was required for market expansion and self-sustainability.

It is necessary to increase competition by encouraging more companies to expand their operations, which requires a self-sustaining revenue model, it said.

Reliance on subsidies alone is not viable for the next wave of growth, it said, adding that a balanced framework is required to ensure that UPI remains robust, inclusive, and future-ready.

Addressing concerns on narratives like external influences may be driving policy changes, the statement said, this is unfounded, completely false and misleading.

If external pressure had been a factor, the government would not have introduced UPI in 2016 or made it free of charge for both merchants as well as citizens since January 2020 and ensured that it became the world's largest real-time interoperable payment system, it said.

The amendment should therefore be viewed in the context of the government's broader objective of ensuring that India's digital payment infrastructure remains sustainable, competitive, innovative and capable of serving the country's rapidly expanding digital economy, it said.

UPI is India's own innovation, and the government remains committed to keeping it free for citizens while ensuring its sustainability for decades to come, it added.

India now stands at the cusp of the next wave of digital payments growth, it said, adding that to expand UPI further into rural and semi-urban areas and maintain competitiveness, the UPI ecosystem must be self- sustainable and affordable.

The amendment to the PSS Act is a forward-looking step to ensure that UPI continues to thrive as a secure, affordable, inclusive, and globally recognised payment system, it said.

Since its launch in 2016-17, the Unified Payments Interface (UPI) has transformed India's digital economy into one of the most inclusive and dynamic payment ecosystems in the world, it said.

What began as a bold experiment in real-time, interoperable payments has now become a global benchmark, processing billions of transactions every month and reaching deep into the fabric of everyday life, it said.

Today, it said, UPI has grown into the world's largest real-time payment system, processing 2,366 crore transactions worth Rs 29.9 lakh crore in July 2026 alone. UPI is now also live in 11 foreign countries, and many other countries have shown interest.

UPI is a national achievement built by Indians, for Indians. The government has promoted, funded and grown it for a decade, and will continue to do so.

Citizens are requested to rely only on official information from the Ministry of Finance, the Reserve Bank of India and NPCI, and not to forward unverified messages, it added.