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Informist, Monday, Aug. 10, 2026

MUMBAI – Consumers will not have to pay any charges for using the Unified Payments Interface, while a nominal Merchant Discount Rate, if introduced, would apply only to a limited set of merchant transactions above a specified threshold, the finance ministry clarified Saturday. 

"As and when MDR (Merchant Discount Rate) charges are introduced, they will apply only to a limited set of merchant transactions, above a certain threshold, at a nominal rate, far lower than debit or credit card MDRs," it said. The Merchant Discount Rate, popularly called MDR, is a fee a merchant pays to a bank for processing digital payments like credit cards, debit cards, or unified payment interfaces.

The clarification comes as Finance Minister Nirmala Sitharaman last week tabled the Taxation and Other Laws (Amendment) Bill, 2026 in Lok Sabha, which seeks to amend the Payment and Settlement Systems Act, 2007, overhauling the legal framework governing digital payment charges. This amendment gives flexibility to the government to decide in the future which digital payment modes could attract Merchant Discount Rate.

The finance ministry said consumers making payments will not face any transaction charges and that all person-to-person transactions will continue to remain free. Moreover, any Merchant Discount Rate introduced in the future would not be a blanket charge across UPI transactions. "Vast majority of the transactions will remain free of charge for merchants on UPI. MDR, if introduced, will only be threshold-based and not blanketly levied to all," it added. 

Further, once Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, the UPI and Services Steering Committee, headed by National Payments Corp. of India will decide on the Merchant Discount Rate, if any, it said. 

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

With UPI transaction volumes rising exponentially, the system requires significant and continuous upgrades in cybersecurity, fraud prevention, and infrastructure, the government said, adding that it was necessary to increase competition by encouraging more companies to expand their operations, which requires a self-sustaining revenue model.

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

The finance ministry also clarified that the policy changes are not owing to external influences, adding that the amendment should 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.

UPI transactions amount rose 19% on year to INR 29.88 trillion in July. In volume terms, UPI transactions grew 22% on year to 23.66 billion in July. End

Reported by Pratiksha

Edited by Akul Nishant Akhoury

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