No charge for retail payments of up to Rs2,000 through UPI: Indian govt

The Indian government has directed banks and payment system providers not to levy charges on payments through the Unified Payments Interface (UPI), the world's largest retail fast-payment gateway by transaction volume, of up to Rs2,000 or on payments made through RuPay debit cards.

However, the government has not specified whether charges would apply to transactions above Rs2,000, payable by merchants. So far, there have been no charges on UPI transactions, regardless of the amount.

As per a gazette notification issued yesterday (14 September), no bank or system provider would impose, whether directly or indirectly, any charge on a person making or receiving a payment through RuPay debit card or UPI transaction of up to Rs2,000.

The notification follows an amendment to Section 10A of the Payment and Settlement Systems Act, 2007, which provides an enabling framework for imposing a Merchant Discount Rate (MDR) on payments through UPI and other notified electronic payment modes.

Parliament passed the amendment bill during the monsoon session last month.

Following the passage of the bill, the government had said the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), would decide on the Merchant Discount Rates (MDR).

Explaining the rationale for imposing charges, the government, in a statement earlier, had said that with exponential transaction volumes, the system requires significant and continuous upgrades in cybersecurity, fraud prevention, and infrastructure.

Charges were required for market expansion and self-sustainability, it had said. It is necessary to increase competition by encouraging more companies to expand their operations, which requires a self-sustaining revenue model, it said.

Depending on subsidies alone is not viable for the next wave of growth, it said, adding that a balanced framework is required to ensure that UPI remains robust, inclusive, and future-ready.

UPI conducts real-time payments between individuals and enables customers to make payments directly to merchants while making purchases.

It is now accepted in 11 countries, with Uzbekistan being the latest entry. The other countries where UPI is accepted are Singapore, the United Arab Emirates, France, Mauritius, Nepal, Bhutan, Qatar, Sri Lanka, Cambodia, and Greece. 

Launched on August 25, 2016, UPI has transformed India's digital payments landscape, with transaction value surging from Rs0.07 lakh crore in FY2017 to around Rs314 lakh crore in FY2026, a more than 4,000-fold increase over the decade.