UPI charges on transactions up to Rs 2,000 will remain prohibited after the Central Government directed banks and payment system providers not to impose direct or indirect fees on these payments or on transactions made using RuPay debit cards.
The notification was issued under Section 10A of the Payment and Settlement Systems Act, 2007. It specifies RuPay-powered debit cards and Unified Payments Interface transactions of up to Rs 2,000 as electronic modes of payment that must remain free of charges.
“No bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment” through the specified electronic modes, the Ministry of Finance said in the notification, according to the report.
The order addresses both sides of a digital payment. It covers the person making a payment as well as the person receiving it, preventing banks and payment system providers from passing on charges through either direct fees or indirect mechanisms for transactions within the notified limit.
The government’s decision comes amid discussions about the long-term financial sustainability of India’s digital-payments ecosystem. The notification keeps smaller UPI transactions free while leaving open the possibility of a nominal Merchant Discount Rate, or MDR, on selected merchant transactions above a specified threshold.
The proposed fee, if introduced, would be paid by merchants rather than consumers, government officials said, according to Reuters. The government has previously indicated that consumer payments and person-to-person transfers would continue to remain free.
The Finance Ministry said the changes form part of a wider effort to make the digital-payments system sustainable and competitive while supporting the growth of India’s digital economy. It also rejected reports that external influences were behind the proposed policy changes, describing those claims as “unfounded, completely false and misleading.”
UPI has become a major part of everyday commerce, including small-value purchases and person-to-person transfers. The system processed 24.51 billion transactions worth Rs 29.82 trillion in August, according to the report. Google Pay and Walmart-owned PhonePe together accounted for about three-fourths of the month’s total UPI transaction volume.
For merchants, the notification preserves a no-charge framework for UPI payments up to Rs 2,000. The financial terms for selected merchant transactions above any future threshold will depend on the government’s proposed changes and the payment ecosystem’s implementation framework.
