Now Reading: UPI stays free for users, most merchant transactions also free
-
01
UPI stays free for users, most merchant transactions also free
The government has ruled out any transaction charges for UPI users, saying person-to-person payments will remain free and the vast majority of merchant transactions will also be free. The clarification follows an amendment to the Payment and Settlement Systems Act, 2007, which the government says is an enabling provision, not an imposition of a merchant discount rate (MDR). Any future MDR, if introduced, would apply only to a limited set of high-value merchant transactions at a nominal rate lower than typical card MDRs, according to a government statement.
The BBC reports that the government has paved the way for banks and payment companies to charge merchants a fee on UPI transactions, potentially ending a decade of free digital payments. Proposals under discussion include an MDR of 0.3-0.5% on larger transactions at big businesses, which could generate up to a billion dollars in revenue for banks and payment firms. The Hindu Business Line reports that UPI adoption in capital markets is accelerating, with brokers processing 21.3 crore transactions worth Rs 2.95 lakh crore between October 2025 and March 2026.
Indian Opinion Analysis
The Hindu and the government statement frame the amendment as a purely enabling provision that preserves the free-to-user model, emphasising that any future MDR would be limited and nominal. The BBC foregrounds the potential end of a free experiment and the billion-dollar revenue opportunity, quoting RBI governor Sanjay Malhotra saying "someone will have to pay the cost." The Hindu Business Line does not cover the MDR debate at all, instead reporting on UPI's expanding role in capital markets. A careful reader should note that while the government stresses that the vast majority of transactions stay free, the BBC report points out that high-value transactions (above Rs 2,000) account for about 67% of merchant payment value but only 4% of volume, meaning the fee could be substantial in revenue terms. The NPCI-led steering committee's decision on any MDR will be the key event to watch.
Coverage: 3 sources, 1 pro-government, 1 government-critical, 1 neutral
Sources (3): thehindu.com (pro government), bbc.co.uk (government critical), thehindubusinessline.com (neutral report)
This story was synthesised by AI from the 3 sources linked above. Methodology and corrections.
Updated: this story now draws on 3 sources.
