Banks can't charge for UPI, RuPay debit card payments up to Rs 2,000: Government

The government has barred banks and payment system providers from charging for UPI transactions of up to Rs 2,000 and RuPay-powered debit card payments. The move leaves scope for fees on higher-value merchant transactions under a possible MDR framework.

In Short

• Govt says banks can't charge users making UPI or RuPay debit card payments
• Move wouldn't affect consumers who use UPI transactions daily
• Higher-value UPI merchant payments may attract MDR charges

The government has prohibited banks and payment system providers from imposing charges on UPI transactions of up to Rs 2,000 and payments made using RuPay-powered debit cards. The move leaves the door open for a possible fee framework for higher-value merchant payments.

The Finance Ministry, in a notification, specified UPI transactions of up to Rs 2,000 and RuPay-powered debit cards as electronic payment modes on which direct or indirect charges cannot be imposed.

The notification states that no bank or system provider can impose, directly or indirectly, any charge on a person making or receiving a payment through the specified modes.

The move comes after Parliament passed the Taxation and Other Laws (Amendment) Bill, 2026, in August. The legislation amended the legal framework to allow the government to specify electronic payment modes that would continue to receive statutory protection from charges.

The amendment had sparked concerns that UPI could eventually cease to be free. Finance Minister Nirmala Sitharaman, however, had said the change was only an enabling provision and that consumers would not have to pay UPI charges.

The government had also said that any Merchant Discount Rate (MDR), if introduced, would apply only to a limited set of merchant transactions above a specified threshold. An MDR is a fee charged to merchants by banks or payment service providers for processing digital payments.

The latest notification formally protects UPI transactions of up to Rs 2,000 from charges. It also narrows the blanket statutory protection that previously covered UPI, leaving scope for a separate framework governing higher-value transactions.

WHAT HAPPENS TO UPI PAYMENTS ABOVE RS 2,000?

The notification does not mean that users will immediately be charged for every UPI payment above Rs 2,000.

Instead, it sets Rs 2,000 as the threshold below which UPI transactions remain protected from charges. Any MDR on higher-value merchant transactions would have to be introduced separately under the applicable policy framework.

The government has previously said that any MDR would be levied on merchants rather than consumers. It has also maintained that person-to-person UPI payments would continue to remain free.

The potential introduction of MDR for certain higher-value merchant transactions could provide a new revenue stream for banks and payment service providers as UPI volumes continue to expand, while keeping small-value digital payments free for users.

UPI, operated by the National Payments Corporation of India (NPCI), is the world's largest retail fast-payment system by transaction volume, according to a 2025 International Monetary Fund report.

In August, UPI processed 24.51 billion transactions worth Rs 29.82 trillion. Google Pay and Walmart-owned PhonePe accounted for about three-fourths of the monthly transaction volume.

The latest rules also keep payments made using RuPay-powered debit cards free of charges.

- Ends
(with inputs from ANI, Reuters)