Amid discussions over the possible introduction of Merchant Discount Rate (MDR) on UPI transactions, the Finance Ministry on Saturday clarified that ordinary users will not have to pay any transaction fee for making payments through UPI. Everyday purchases, bill payments and person-to-person (P2P) transactions will continue to remain free. The government also said that most UPI transactions conducted by merchants will remain free.
According to the Finance Ministry, if MDR is introduced on UPI in the future, it will not be imposed uniformly on all merchants or all transactions. Under the proposed framework, the charge may apply only to certain merchant transactions above a specified threshold. The government has indicated that the rate, if introduced, would be nominal and lower than the MDR generally applicable to debit and credit card transactions.
MDR Rate Not Decided Yet
The Finance Ministry has clarified that no MDR rate has been finalised so far. Before any such mechanism can be introduced, the Taxation and Other Laws (Amendment) Bill, 2026 would have to be passed by Parliament.
Under the government’s proposal, the Bill seeks to amend Section 10A of the Payment and Settlement Systems Act, 2007. If the proposed legal changes are approved and a decision is subsequently taken to introduce MDR on UPI, the UPI and Services Steering Committee, chaired by NPCI, would determine the rate and the framework for implementing it.
This means there is currently no fixed UPI charge that consumers or merchants are required to pay under the proposed MDR framework.
No Direct Burden on Consumers
The government has made it clear that there is no proposal to charge ordinary customers a transaction fee for using UPI. Consumers will therefore continue to be able to use UPI for payments at shops, online purchases, bill payments and transfers to individuals without paying an additional transaction charge.
Person-to-person payments will also remain free. The clarification comes amid widespread discussions and reports about a possible change in the UPI fee structure, which had raised concerns among users about whether they could eventually be charged for routine digital payments.
Why Is a Legal Change Being Proposed?
According to the Finance Ministry, UPI usage has been expanding rapidly across the country. Maintaining and strengthening the growing digital payments network requires continued investment in cybersecurity, fraud prevention, technological infrastructure and system capacity.
The government has said that relying entirely on public subsidies may not be sufficient to sustain the next phase of UPI’s growth over the long term. It therefore believes that a financially sustainable framework is needed to strengthen the digital payments ecosystem and encourage private companies to invest in the infrastructure.
The government also expects greater participation from payment companies to increase competition in the sector. Increased competition could encourage technological investment and help expand UPI services further into rural areas and smaller cities.
UPI Records 2,366 Crore Transactions in July
According to government data, UPI processed 2,366 crore transactions in July 2026, with the total value of transactions reaching approximately ₹29.9 lakh crore. As of June 2026, around 55.49 crore users were connected to the UPI ecosystem.
During the financial year 2025-26, UPI processed a total of 24,162 crore transactions worth ₹314 lakh crore. UPI is currently available in 11 countries, while several other countries have also expressed interest in adopting India’s digital payment system.
The continued growth in transaction volumes has increased the need for investment in payment infrastructure, cybersecurity and fraud prevention mechanisms. The proposed framework is therefore being presented by the government as part of efforts to ensure the long-term sustainability of the UPI ecosystem.
Government Rejects Reports of External Pressure
The Finance Ministry has also rejected reports suggesting that the possible changes to UPI’s fee structure were being introduced due to external pressure. The government described such reports as incorrect and misleading.
The government reiterated that UPI is India’s own digital payments infrastructure and said the proposed measures are intended to keep the system secure, affordable, inclusive and financially sustainable over the long term.
The ministry has also advised citizens to rely only on official sources, including the Finance Ministry, the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI), for information regarding UPI charges, MDR and any proposed changes to the payment system.
For now, ordinary consumers can continue using UPI without transaction charges, while any future MDR mechanism for selected merchant transactions will depend on the proposed legislative changes and subsequent decisions by the designated UPI authorities.
