Breaking: UPI payments to remain free for users, clarifies Govt
Limited Merchant MDR May Be Introduced
Babushahi Bureau
New Delhi, August 8, 2026: The Government of India has clarified that users will not be charged for making payments through the Unified Payments Interface (UPI), amid concerns over proposed amendments to the Payment and Settlement Systems Act (PSS Act).
The government said all Person-to-Person (P2P) UPI transactions will continue to remain free. It also clarified that the vast majority of merchant transactions will remain free of charge.
However, if Merchant Discount Rate (MDR) is introduced in the future, it would apply only to a limited category of merchant transactions above a specified threshold and at a nominal rate, the government said. The proposed MDR would be significantly lower than rates generally applicable to debit or credit card transactions.
According to the government, the proposed amendment to Section 10A of the Payment and Settlement Systems Act, 2007, is an enabling provision aimed at ensuring the long-term sustainability and growth of the UPI ecosystem.
Government explains proposed UPI framework
The clarification comes after concerns and reports suggesting that the amendment could lead to charges being imposed on ordinary UPI users.
The government said UPI’s rapidly increasing transaction volumes require continuous investment in cybersecurity, fraud prevention, technology and payment infrastructure.
It also said a sustainable revenue model was needed to encourage greater participation and competition among companies operating in the digital payments ecosystem, while reducing dependence on government subsidies.
The government stressed that any decision on MDR would be taken by the “UPI and Services Steering Committee” headed by the National Payments Corporation of India (NPCI), after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026.
UPI records 2,366 crore transactions in July
The government highlighted the rapid growth of UPI, which has become the world’s largest real-time interoperable payment system.
In July 2026 alone, UPI processed 2,366 crore transactions worth Rs 29.9 lakh crore, according to the government.
UPI is currently operational in 11 foreign countries, while several other countries have also expressed interest in adopting or integrating the system.
The government said the proposed changes were aimed at ensuring that India’s digital payment infrastructure remains secure, competitive, innovative and capable of supporting the country’s expanding digital economy.
It reiterated that UPI will remain free for citizens, with no charges on everyday transactions made by users.
The government also urged citizens to rely on official information issued by the Ministry of Finance, the Reserve Bank of India and NPCI and avoid forwarding unverified messages regarding UPI charges.