Discover how the Payments Council of India has reassured millions of users that Unified Payments Interface (UPI) transactions will continue to be free for consumers and small merchants across India, despite recent legislative developments.
Key Points
- UPI services will remain free for consumers and small merchants, as confirmed by the Payments Council of India.
- The Lok Sabha passed a Bill allowing the government to permit charges on electronic payments, but this will not impact consumer UPI transactions.
- Small merchants, including kirana stores, will continue to accept UPI payments without paying Merchant Discount Rate (MDR).
- Discussions are ongoing to develop a sustainable financial model for UPI infrastructure, ensuring protection for consumers and small businesses.
- Finance Minister Nirmala Sitharaman clarified that MDR applies to merchants, not customers, and supports infrastructure investment.
In a post on X, the association said, "UPI has always been free for consumers since its launch in 2016. Every Indian can continue making instant digital payments without paying any transaction charges." Clarifying the ongoing debate around UPI charges, Payments Council of India said small merchants, including kirana stores, will also continue to accept UPI payments without paying the Merchant Discount Rate (MDR).
Ensuring Sustainable UPI Infrastructure
It said the recent discussions are centred on developing a sustainable financial model to support the infrastructure behind UPI, which has evolved into the world's largest real-time payment system, while ensuring that consumers and small businesses remain protected.
Finance Minister Nirmala Sitharaman, on Thursday, said that the Merchant Discount Rate on digital transactions applies to merchants and not to customers, and the MDR charge would support banks and fintech to invest more in infrastructure and security. Hitting out at Congress leader Jairam Ramesh over his remark that ordinary people may have to pay more for using UPI, Sitharaman, in a post on X, said the UPI and Services Steering Committee headed by NPCI is yet to decide on the MDR, which would happen only after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026.
Government's Stance On Digital Payment Charges
Through the bill, the government has proposed that the central government can decide, via a notification, which electronic payment modes or transactions would remain free.
Payments Council of India said that banks, payment companies, fintech firms, the National Payments Corporation of India (NPCI) and the Reserve Bank of India (RBI) have collectively invested for nearly a decade in technology, cybersecurity, fraud prevention, innovation and customer support to build and maintain the UPI ecosystem.
Investment In UPI Ecosystem And Future Growth
Operating a national digital payment infrastructure requires continuous spending on technology, cybersecurity, compliance, fraud prevention, customer support and innovation, it said, adding that these costs are currently borne by banks and the payment service providers participating in the ecosystem.
It also said that even if merchant service charges are levied on large merchants in future, consumers would not be required to pay for using UPI. Merchant service charges, wherever applicable, are commercial arrangements between merchants and payment service providers and do not translate into charges for consumers, it said, adding that such arrangements are common across digital payment systems globally.
It emphasised that UPI has become a critical piece of national digital infrastructure used by hundreds of millions of Indians every day, making continued investment in security, resilience, innovation and fraud prevention essential to support its future growth.
