Will UPI Services Remain Free for Consumers? Here's What You Need to Know!

The Payments Council of India has confirmed that consumers and small merchants will continue to enjoy free UPI services, despite recent legislative changes. The Lok Sabha's approval of a Bill to amend the Payment and Settlement Systems Act, 2007, has raised questions about potential charges on UPI transactions. However, officials assure that UPI will remain free for users, with ongoing discussions focused on creating a sustainable financial model for the payment infrastructure. Finance Minister Nirmala Sitharaman clarified that any Merchant Discount Rate (MDR) would apply to merchants, not consumers. This article delves into the implications of the new Bill and what it means for everyday users of UPI.

By Narendra Chaudhary Aug 7, 2026, 21:48 IST

UPI Services to Remain Free Amid Legislative Changes

In New Delhi, the Payments Council of India announced that consumers and small merchants will continue to benefit from free Unified Payments Interface (UPI) services, despite the Lok Sabha's recent approval of a Bill to amend the Payment and Settlement Systems Act of 2007.

This statement follows the Lok Sabha's decision to allow the government to authorize banks and service providers to impose charges on UPI transactions and other electronic payment methods.

The Payments Council emphasized on social media that UPI has remained free for users since its inception in 2016, allowing every Indian to make instant digital payments without incurring transaction fees.

Addressing concerns regarding UPI charges, the Council reassured that small merchants, including local stores, will still be able to accept UPI payments without facing the Merchant Discount Rate (MDR).

The ongoing discussions aim to create a sustainable financial model that supports the infrastructure of UPI, which has become the largest real-time payment system globally, while ensuring consumer and small business protection.

Finance Minister Nirmala Sitharaman clarified that the MDR applies to merchants rather than customers, stating that these charges would help banks and fintech companies invest in infrastructure and security.

In response to Congress leader Jairam Ramesh's comments about potential increased costs for ordinary users, Sitharaman noted that the UPI and Services Steering Committee, led by the NPCI, has yet to finalize the MDR, which will only occur after the Taxation and Other Laws (Amendment) Bill, 2026, is passed.

The proposed legislation allows the central government to determine which electronic payment methods or transactions will remain free through notifications.

The Payments Council highlighted that banks, payment companies, fintech firms, the National Payments Corporation of India (NPCI), and the Reserve Bank of India (RBI) have collectively invested in technology, cybersecurity, fraud prevention, and customer support to sustain the UPI ecosystem for nearly a decade.

Maintaining a national digital payment infrastructure necessitates ongoing investments in technology, cybersecurity, compliance, and innovation, which are currently funded by banks and payment service providers involved in the ecosystem.

Even if merchant service charges are introduced for larger merchants in the future, consumers will not be required to pay for using UPI.

Any merchant service charges will be part of commercial agreements between merchants and payment service providers and will not affect consumers, a practice common in digital payment systems worldwide.

The Council reiterated that UPI has become an essential component of national digital infrastructure, utilized daily by millions of Indians, making continued investment in security, resilience, and innovation crucial for its future development.