UPI Payments Above ₹2,000 May Soon Attract Fee Under Proposed Law Change

NEW DELHI, Aug 5: Unified Payments Interface (UPI) transactions above ₹2,000 could attract a merchant discount rate (MDR) in the future under proposed legal changes, with RBI Governor Sanjay Malhotra saying that “someone has to pay the cost” of maintaining the rapidly expanding digital payments ecosystem.

Speaking at the post-policy press conference, Malhotra said the proposed changes could support the financial sustainability of the UPI ecosystem, while adding that further developments on the issue needed to be watched.

The Government has proposed amendments to the Payment and Settlement Systems Act, 2007, through the Taxation and Other Laws (Amendment) Bill, 2026, which could enable merchant charges on select UPI transactions in the future.

According to sources, high-value UPI transactions above ₹2,000 made to large businesses could be among the first categories to attract MDR if the proposal is implemented. Consumers are not expected to be directly affected, with the merchant likely to bear the charge.

There is currently no fixed timeline, final decision or detailed framework for implementation, sources said.

Estimates suggest transactions above the ₹2,000 threshold could account for around five per cent of all UPI transactions but represent nearly 65 per cent of their total value. Routine low-value payments, including purchases of milk, vegetables and groceries and payments for auto-rickshaws and taxis, are not expected to be covered.

UPI recorded 23.66 billion transactions worth around ₹29.9 lakh crore in July, according to data from the National Payments Corporation of India (NPCI).

MDR is already applicable to certain card-based payments, with the framework varying by card type. RBI has prescribed MDR caps for eligible debit-card transactions, while RuPay debit-card transactions are subject to zero MDR under the government’s prescribed electronic-payment framework. Credit-card MDR is generally determined through arrangements involving card networks, issuers, acquirers and merchants.

MDR is ordinarily borne by merchants rather than directly passed on to customers. (Agencies)