NEW DELHI (Economy India): The government has directed banks and payment system providers not to levy charges on UPI transactions of up to Rs 2,000 or on payments made through RuPay debit cards, while leaving the question of Merchant Discount Rate (MDR) on higher-value UPI transactions open.
A gazette notification dated September 14 states that no bank or payment system provider can impose, directly or indirectly, any charge on a person making or receiving a payment through a RuPay debit card or a UPI transaction of up to Rs 2,000.
The notification follows Parliament’s approval of an amendment to Section 10A of the Payment and Settlement Systems Act, 2007, providing an enabling framework for imposing MDR on UPI and other notified electronic payment modes.
MDR Decision for Transactions Above Rs 2,000 Still Pending
The government has not yet specified whether MDR will be imposed on UPI transactions above Rs 2,000 and, if so, at what rate.
Until now, UPI transactions have not attracted MDR irrespective of their value. Following the passage of the amendment Bill during the Monsoon Session of Parliament, the government had said that the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), would decide the applicable MDR rates.
The latest notification, however, provides a clear protection for UPI transactions up to Rs 2,000 and RuPay debit card payments.
Why Government Is Considering MDR
The government has argued that the rapid growth in digital payments has created the need for continuous investment in the UPI ecosystem.
With transaction volumes increasing exponentially, payment infrastructure requires sustained upgrades in areas such as cybersecurity, fraud prevention and technological infrastructure.
According to the government, introducing charges could help support market expansion and make the digital payments ecosystem more financially sustainable.
It has also argued that a self-sustaining revenue model could encourage greater competition by enabling more companies to expand their operations in the digital payments space.
Subsidies Alone Not Viable for Future Growth
The government has said that relying solely on subsidies would not be a viable model for the next phase of UPI’s growth.
It has stressed the need for a balanced framework that can ensure UPI remains robust, inclusive and future-ready, while also supporting continued investment in the payment infrastructure.
The proposed framework is therefore aimed at balancing the affordability of digital payments with the long-term sustainability of the UPI ecosystem.
UPI Continues to Drive Digital Payments
UPI is operated by the National Payments Corporation of India (NPCI), an initiative of the Reserve Bank of India (RBI) and the Indian Banks’ Association.
The real-time payment system enables transfers between individuals and allows customers to make direct payments to merchants for purchases.
Since its launch on August 25, 2016, UPI has transformed India’s digital payments landscape. Transaction value increased from Rs 0.07 lakh crore in FY17 to around Rs 314 lakh crore in FY26, representing more than a 4,000-fold increase over the decade.
UPI Expands Beyond India
UPI’s international footprint has also continued to grow. The payment system is currently accepted in 11 countries, with Uzbekistan being the latest addition.
The other countries where UPI is accepted include Singapore, the United Arab Emirates, France, Mauritius, Nepal, Bhutan, Qatar, Sri Lanka, Cambodia and Greece.
The growing domestic transaction volumes and expanding international presence underline the importance of ensuring the long-term sustainability of India’s digital payments infrastructure.
With UPI transactions above Rs 2,000 potentially becoming subject to MDR in the future, the final decision of the relevant committee will be closely watched by banks, payment providers, merchants and consumers.
Source: PTI | Government Notification | Economy India
