UPI payments remain free for consumers: Govt

Revised MDR applies to select high-value merchant transactions, with safeguards for users

Chandigarh, September 16

UPI payments remained free for consumers, with no charges on person-to-person transfers, shop payments, or QR code transactions. Under the revised framework, select merchant transactions above Rs 2,000 attracted a Merchant Discount Rate of 0.4 percent, which merchants would bear, said the Ministry of Finance in an official statement.

Person-to-person UPI transfers remained free regardless of the amount. Small merchants earning up to Rs 1 lakh per month through UPI QR codes also continued to enjoy zero charges. More than 95 percent of merchant payments were below Rs 2,000 and these transactions remained free. The 0.4 percent MDR on eligible transactions above Rs 2,000 was lower than charges typically associated with credit cards and other payment networks, the ministry further said.

Essential services such as railways, fuel, telecom, bill payments and insurance attracted a flat fee of Rs 5 per transaction above Rs 2,000. Payments related to mutual funds and securities carried a special rate of 0.02 percent, capped at Rs 300.

Banks were instructed to ensure that merchants did not pass the MDR cost on to customers. UPI applications were also not permitted to impose platform charges or hidden fees.

Claims that the revised framework was introduced due to foreign pressure were incorrect. UPI policy decisions were taken independently, with the stated objective of developing a self-sustaining, inclusive and affordable digital payments ecosystem.

Since its launch in 2016, UPI has grown into a major real-time interoperable payment system. It processed 24.5 billion transactions in August 2026 alone.

The revised framework was intended to support investment in infrastructure, cybersecurity, small merchants in Tier III to Tier VI towns and rural areas, and awareness initiatives to expand UPI adoption. Resources generated from higher-value merchant transactions were expected to be reinvested to strengthen digital payments and support small businesses across the country.