UPI remains free for users, nominal fee only for large merchant transactions: Govt

The government on Saturday sought to dispel speculation over possible charges on UPI transactions, clarifying that individual users will not have to pay any fee and that the vast majority of merchant payments will continue to remain free.

In a statement, the government said any future merchant discount rate (MDR) would apply only to a limited set of merchant transactions above a specified threshold, and at a nominal rate lower than typical debit and credit card MDRs. All person-to-person UPI transactions will continue to be free, it added.

The clarification comes after an amendment to the Payment and Settlement Systems Act, 2007, sparked concerns that the government was preparing to impose charges on UPI users. The proposed change to Section 10A of the law is an 'enabling provision' and does not itself impose an MDR, the government said.

Once Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, the UPI and Services Steering Committee headed by the National Payments Corp. of India (NPCI) will decide on any MDR, the government explained. Any future charge would be threshold-based rather than applied across all UPI transactions, ensuring the 'vast majority' of merchant payments remain free.

The government said the proposed framework is aimed at creating a more sustainable revenue model for UPI as transaction volumes surge. It noted that the system requires continued investment in cybersecurity, fraud prevention and payment infrastructure. A balanced framework is necessary to ensure UPI remains robust, inclusive and future-ready, it said.

United Payment Interface, or UPI, has become the world's largest real-time payment system since its launch in 2016-17. In July 2026 alone, it processed 2,366 crore transactions worth ₹29.9 lakh crore. The platform is now live in 11 foreign countries, with several others expressing interest in adopting or integrating UPI, the government said.

The statement comes two days after the Lok Sabha passed a Bill to amend the Payment and Settlement Systems Act, 2007, which authorises the government to permit banks and other service providers to levy charges on payments through UPI and other notified electronic payment modes.

Addressing concerns that external influences may be driving policy changes, the government dismissed such narratives as 'unfounded, completely false and misleading.' It pointed out that UPI was introduced in 2016 and has been free for both merchants and citizens since January 2020. 'If external pressure had been a factor, the government would not have introduced UPI in 2016 or made it free of charge... and ensured that it became the world's largest real-time interoperable payment system,' it said.

The government reiterated that the amendment should be viewed as a step towards long-term sustainability, technological advancement and resilience against emerging risks. It said that with exponential transaction volumes, continuous upgrades in cybersecurity and infrastructure are essential. It also argued that a self-sustaining revenue model is needed to encourage more companies to expand their operations and increase competition, as reliance on subsidies alone would not be viable for the next wave of growth.

The clarification is expected to allay concerns among the platform's millions of users, while the proposed threshold-based MDR framework, if implemented, would affect only a small segment of high-value merchant transactions.