UPI Payments to Remain Free for Users; Government Clarifies Position on Merchant Charges

The Central Government has clarified that consumers will not be charged for making UPI payments, addressing concerns over the possibility of transaction fees being introduced for digital payments.

According to the government's clarification, person-to-person (P2P) UPI transactions will continue to remain free, allowing users to make digital payments without any additional transaction charge.

However, the government has indicated that a nominal Merchant Discount Rate (MDR) could be considered in the future for a limited category of merchant transactions, subject to applicable guidelines and government decisions.

If such an MDR is introduced, it would apply to specified merchant transactions rather than ordinary person-to-person payments. The majority of merchants are expected to remain outside the scope of any such proposed charge, subject to the final rules.

The clarification follows discussions surrounding possible changes to payment-related regulations, which had raised concerns among users about whether UPI transactions could become chargeable.

The Finance Ministry has maintained that there is no proposal to impose charges on consumers for using UPI. Any future merchant-related fee, if introduced, would be limited in scope and would be subject to detailed guidelines and official notification.

The government has said that the approach is aimed at maintaining the affordability of digital payments for the public while supporting the long-term sustainability of India's digital payments ecosystem.

Banks and payment service providers have previously highlighted the infrastructure and operational costs involved in maintaining digital payment systems. A limited MDR on certain commercial transactions has been discussed as one possible mechanism to address such costs without directly affecting ordinary consumers.

UPI has become one of India's most widely used digital payment systems, recording billions of transactions each month and playing a major role in the country's digital payments ecosystem.

For now, consumers can continue using UPI without a transaction charge. Any future decision regarding merchant fees would take effect only after the government issues the necessary guidelines or notification.