The government has clarified that UPI users will not have to pay any transaction charges, and all Person-to-Person (P2P) transactions will continue to remain free.
It also said that any Merchant Discount Rate (MDR), if introduced in the future, would apply only to a limited set of merchant transactions above a specified threshold and at a nominal rate, much lower than debit or credit card MDRs.
The clarification comes amid concerns over the recent amendment to the Payment and Settlement Systems Act (PSS Act), which some reports had interpreted as a move to impose charges on ordinary UPI users.
The government said the proposed amendment is an enabling provision aimed at ensuring the long-term sustainability, technological advancement and resilience of the UPI system.
Under the proposed amendment to Section 10A of the Payment and Settlement Systems Act, 2007, the UPI and Services Steering Committee headed by NPCI would decide on the MDR, if any, after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026.
The government stressed that the vast majority of UPI transactions would continue to remain free for merchants, and no blanket MDR would be imposed.
The government said UPI’s rapidly increasing transaction volumes require continuous investment in cybersecurity, fraud prevention and infrastructure.
It added that a self-sustaining revenue model is necessary to encourage greater market participation and reduce reliance on subsidies alone.
Rejecting reports suggesting that external influences were behind the policy change, the government termed such claims “unfounded, completely false and misleading”.
In the press release, it is mentioned further that,
“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 government said UPI has now become the world’s largest real-time payment system, recording 2,366 crore transactions worth ₹29.9 lakh crore in July 2026 alone.
The system is currently live in 11 foreign countries, while several other countries have expressed interest in adopting it.
Reiterating its position, the government said UPI would remain free for citizens, with no charges on everyday transactions. Any future MDR would be nominal and limited to specified merchant transactions.
It also urged citizens to rely only on official information from the Ministry of Finance, the Reserve Bank of India and NPCI and avoid forwarding unverified messages.
Source: Press Information Bureau
Date of issue: 08.08.2026
