Government Mandates No Charges on UPI Transactions Under ₹2,000: What You Need to Know
New Regulations on UPI Transactions
New Delhi: The government has issued a directive to banks and payment service providers, prohibiting them from charging fees on Unified Payments Interface (UPI) transactions that are ₹2,000 or less, as well as on payments made using RuPay debit cards.
However, it remains unclear whether fees will apply to transactions exceeding ₹2,000, which would be the responsibility of merchants. Currently, there are no fees associated with UPI transactions, regardless of the amount.
According to a gazette notification released on September 14, no financial institution or service provider is allowed to impose any charges, either directly or indirectly, on individuals making or receiving payments via RuPay debit cards or UPI transactions up to ₹2,000.
This notification follows an amendment to section 10 A of the Payment and Settlement Systems Act, 2007, which lays the groundwork for implementing a Merchant Discount Rate (MDR) on payments made through UPI and other designated electronic payment methods.
The amendment was approved by Parliament during the Monsoon Session, which wrapped up on August 13, 2026. After the Bill's passage, the government announced that the UPI and Services Steering Committee, led by the National Payments Corporation of India (NPCI), would determine the MDR rates.
In a statement, the government explained that the need for charges arises from the rapid increase in transaction volumes, necessitating ongoing enhancements in cybersecurity, fraud prevention, and infrastructure.
The government emphasized that charges are essential for market growth and self-sustainability, aiming to foster competition by encouraging more companies to broaden their operations, which requires a self-sustaining revenue model.
Relying solely on subsidies is not feasible for future growth, and a balanced framework is crucial to ensure that UPI remains strong, inclusive, and prepared for the future.
UPI is managed by the National Payments Corporation of India (NPCI), a collaboration between the Reserve Bank of India (RBI) and the Indian Banks' Association.
It facilitates real-time payments between users and allows customers to pay merchants directly during purchases. UPI is now accepted in 11 countries, with Uzbekistan being the latest addition.
Other countries where UPI is operational include Singapore, the United Arab Emirates, France, Mauritius, Nepal, Bhutan, Qatar, Sri Lanka, Cambodia, and Greece.
Since its launch on August 25, 2016, UPI has revolutionized India's digital payment ecosystem, with transaction values soaring from ₹0.07 lakh crore in FY17 to approximately ₹314 lakh crore in FY26, marking an increase of over 4,000 times in just a decade.