UPI to remain free for consumers, govt clarifies proposed MDR rules

The government reiterated that UPI will remain free for citizens, with no charges on everyday transactions for consumers

The Ministry of Finance on Saturday said consumers will not face any transaction charges for using the Unified Payments Interface (UPI), amid discussions over a possible merchant discount rate (MDR).  The ministry said any MDR, if introduced, would apply only to a limited set of merchant transactions above a specified threshold and at a nominal rate. It added that the rate would be lower than MDRs charged on debit and credit card transactions.

No charges for consumers

The government said all person-to-person (P2P) UPI transactions will continue to be free.

 

“No charges for users: Consumers making payments will not face any transaction charges,” the ministry said.

 

 

It also said the vast majority of merchant transactions would remain free and that any MDR would be threshold-based rather than applied across all UPI transactions.

MDR framework

The clarification comes after Parliament passed the Taxation and Other Laws (Amendment) Bill, 2026, which proposes changes to Section 10A of the Payment and Settlement Systems Act, 2007.

 

Once the Bill is passed, the “UPI and Services Steering Committee” headed by the National Payments Corporation of India (NPCI) will decide on the MDR, if any, the ministry said.

 

The ministry said the amendment is intended to support the long-term sustainability of UPI and its continued investment in cybersecurity, fraud prevention and infrastructure.

 

The government said UPI's transaction volumes have grown sharply, increasing the need for continuous investment in the payment system.

 

UPI processed 2,366 crore transactions worth ₹29.9 trillion in July 2026, according to the ministry. The platform is also live in 11 foreign countries.

 

The government said reliance on subsidies alone would not be viable for the next phase of UPI's growth and that a self-sustaining revenue model would be needed to support further expansion.

 

The ministry said the proposed framework is intended to support UPI's expansion into rural and semi-urban areas while maintaining its affordability and security.