The Union Ministry of Finance has issued a notification under Section 10A of the Payment and Settlement Systems Act, 2007, stating that banks and system providers cannot charge fees on UPI transactions up to Rs 2,000 and RuPay debit card payments. A limited set of merchant transactions will attract a Merchant Discount Rate above a certain threshold and at a nominal rate.
The Union government has announced that banks and system providers cannot charge fees on Unified Payments Interface (UPI) transactions of up to Rs 2,000 and RuPay debit card payments. This decision was made under Section 10A of the Payment and Settlement Systems Act, 2007, which was amended through the 2026 Taxation and Other Laws Amendment Bill passed in August. The legislation had raised concerns about potential charges on UPI transactions, but the finance ministry later clarified that consumers making UPI payments will not face any transaction charges.
In 2025-’26, transactions exceeding Rs 2,000 accounted for just 4% of person-to-merchant UPI payment, according to The Indian Express. However, these transactions represented nearly two-thirds of the total value of person-to-merchant UPI payments. This move is expected to promote digital transactions and financial inclusion.
It has been clarified that a limited set of merchant transactions will attract a Merchant Discount Rate above a certain threshold and at a nominal rate. The Merchant Discount Rate is a fee charged to businesses by banks to cover the costs of processing transactions, typically ranging from 1% to 3% for credit card payments and up to 0.9% for debit card transactions.
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