The government has stopped banks and payment system providers from charging users for UPI transactions of up to ₹2,000. Charges have also been barred on payments made through RuPay debit cards.
According to a gazette notification issued on September 14, banks and payment system providers cannot charge a person, either directly or indirectly, for making or receiving a RuPay debit card payment or a UPI transaction of up to ₹2,000.
However, the notification has not clearly mentioned whether charges could be introduced for UPI transactions above ₹2,000, especially for payments made by merchants. Till now, UPI transactions have remained free, irrespective of the transaction amount.
The decision comes after an amendment to Section 10A of the Payment and Settlement Systems Act, 2007. The amendment provides a framework for introducing Merchant Discount Rate (MDR) on UPI and other electronic payment methods notified by the government.
The amendment Bill was passed by Parliament during the Monsoon Session, which ended on August 13, 2026. Following this, the government said that the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), would decide the applicable MDR rates.
The government has said that a proper revenue model is needed because UPI transactions are growing rapidly. It pointed out that the digital payments system needs continuous investment in areas such as cybersecurity, fraud prevention and upgrading payment infrastructure.
The government also believes that having a sustainable revenue model could encourage more companies to enter the sector and increase competition. It said that depending on government subsidies for a long time may not be practical as UPI continues to expand. A balanced system, according to the government, would help keep UPI strong and accessible to users.
UPI is operated by NPCI and allows people to make instant bank-to-bank payments as well as payments directly to merchants. NPCI was set up as an initiative of the Reserve Bank of India and the Indian Banks’ Association.
UPI has also expanded outside India and is currently accepted in 11 countries. Uzbekistan is the latest country to join the list, along with Singapore, the UAE, France, Mauritius, Nepal, Bhutan, Qatar, Sri Lanka, Cambodia and Greece.
UPI was launched on August 25, 2016, and has since become one of the most important parts of India’s digital payment system. Its transaction value increased from just ₹0.07 lakh crore in FY17 to around ₹314 lakh crore in FY26, which is more than 4,000 times growth in a decade.