What happened: Government assurance on UPI user charges and conditional merchant MDR

The Government of India stated that UPI users who make payments will not face any transaction charges. The Government also stated that all person-to-person (P2P) UPI transactions will remain free of charge. The Government further stated that if merchants are charged a Merchant Discount Rate (MDR), MDR would apply only to a limited set of merchant transactions above a threshold and at a nominal rate, and that the vast majority of UPI transactions for merchants will remain free of charge.

Background and earlier position: Government states UPI became free for users and merchants from January 2020

The Government stated that UPI was introduced in 2016. The Government stated that UPI became free for both merchants and citizens from January 2020. The Government also cited UPI scale, stating that UPI became the world’s largest real-time interoperable payment system. The Government reported UPI processing volumes of 2,366 crore transactions worth ₹29.9 lakh crore in July 2026 and stated that UPI is live in 11 foreign countries.

What changed now: Legal enabling amendment route and MDR decision mechanism

The Government stated that any merchant MDR, if introduced, will be decided by the UPI and Services Steering Committee headed by the National Payments Corporation of India (NPCI). The Government linked the MDR enabling pathway to Parliament passing the Taxation and Other Laws (Amendment) Bill, 2026, which proposes to amend Section 10A of the Payment and Settlement Systems Act, 2007.

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