Justifying marginal charges the government has said with exponential transaction volumes through UPI, the system requires significant and continuous upgrades in cybersecurity, fraud prevention, and infrastructure. It is also necessary to increase competition by encouraging more companies to expand their operations, which requires a self-sustaining revenue model.
New Delhi:The government has clarified that there will not be no charges for users and consumers making any payments through Unified Payments Interface (UPI).
All person to person transactions will also contintinue to be free of charges.
Nominal MDR for merchants
As and when merchant discount rate(MDR) 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, said the government .
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.
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, said the government.
Why Amend the Payment and Settlement Systems Act?
According to he government, the recent amendment to the Payment and Settlement Systems Act (PSS Act) has generated debate, with some misinterpreting it as a move to impose charges on ordinary users.
In reality, the amendment is an enabling provision designed to ensure UPI’s long-term sustainability, technological advancement, and resilience against emerging risks,said the government. .
Justifying marginal charges the government has said with exponential transaction volumes through UPI, the system requires significant and continuous upgrades in cybersecurity, fraud prevention, and infrastructure.
It is also necessary to increase competition by encouraging more companies to expand their operations, which requires a self-sustaining revenue model.
Self-sustainability
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.
Addressing Concerns on False Narratives
Some of the media reports have suggested that external influences may be driving policy changes. 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.
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.
The truth is simple: 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.
The Next Wave of Growth
India now stands at the cusp of the next wave of digital payments growth. 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 recognized payment system.