Now Reading: Govt says UPI stays free for users, most merchants too
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Govt says UPI stays free for users, most merchants too
The government has clarified that UPI transactions will remain free for all users, and the vast majority of merchant payments will also incur no charges. Any future merchant discount rate (MDR), if…
The Story in Brief
The government has clarified that UPI transactions will remain free for all users, and the vast majority of merchant payments will also incur no charges. Any future merchant discount rate (MDR), if introduced, would apply only to large transactions above a threshold and at a nominal rate, lower than card MDRs. The clarification followed the Lok Sabha passing the Taxation and Other Laws (Amendment) Bill, 2026, which amends the Payment and Settlement Systems Act and sparked speculation about new fees.
The government called the amendment an 'enabling provision' for UPI's long-term sustainability, not an immediate imposition of charges. A steering committee headed by NPCI will decide on any MDR if the bill becomes law. Separately, Razorpay CEO Harshil Mathur and PhonePe CEO Sameer Nigam publicly backed the 'free for consumers' principle, with Mathur calling for a sustainable model that protects small merchants. UPI processed 2,366 crore transactions worth Rs 29.9 lakh crore in July 2026.
The Indian Opinion
The government's assurance that UPI stays free is welcome, but the real story is the quiet groundwork for a merchant discount rate. The amendment to the Payment and Settlement Systems Act is an 'enabling provision', a door left ajar. Fintech CEOs and the Payments Council now back a fee on only large merchants, but the threshold and exact rate remain unclear. The test is whether the NPCI steering committee, when it meets, will set that threshold high enough to truly protect small shopkeepers, or allow a slow creep of charges.
Sources (2): government.economictimes.indiatimes.com, livemint.com
This story was synthesised by AI from the 2 sources linked above.
