Centre tells banks no charges on RuPay debit card payments or UPI transactions up to ₹2,000
The Centre on Monday said it is exercising powers under Section 10 A of the Payment and Settlement Systems and specified that banks cannot impose charges on Unified Payments Interface (UPI) transactions or RuPay debit card payments up to ₹2,000 in value.
The Finance Ministry, in its notification, stated that “no bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment by using the electronic modes of payment specified”.
The electronic modes of payment specified included debit cards powered by RuPay and UPI transactions up to ₹2,000.
Merchant discount rate (MDR) charges
Notably, this comes after the Lok Sabha on 6 August passed the Taxation and Other Laws (Amendment) Bill, 2026, which amended the Payment and Settlement Systems Act, 2007 and allowed the government to bring back merchant discount rate (MDR) charges on transactions conducted through the UPI system.
In clarifications issued on social media in August, Union Finance Minister Nirmala Sitharaman and the Payments Council of India (PCI) said MDR on digital transactions applies to merchants, not customers. She added that the charge would support banks and fintech to invest more in infrastructure and security.
How is MDR related to charges on UPI transactions?
The legislation opened the door to scrapping the zero MDR provision under Section 10A and allowed banks and payments system providers (PSPs) to likely impose charges on high-value UPI transactions.
Regulated by the Reserve Bank of India (RBI), MDR is the fee businesses pay to banks and PSPs to process online transactions made by customers. Since 2020, this has stood at 0% for UPI and RuPay debit card transactions, as the Centre sought to promote digital payments and mandated no MDR for customers and merchants.
In practice, this works like this: A customer pays ₹1,000 for an item using a credit or debit card. Of this, a small percentage is deducted and split between the banks on both ends, while the merchant receives the net amount. At present, for UPI transactions, merchants receive the full transaction amount.
Why is there a discussion around UPI charges now?
The PCI, in its FAQs, noted that UPI has evolved from a new payment platform into the world’s largest real-time payment system. “As the ecosystem continues to expand, discussions are taking place on how to sustainably support the infrastructure that enables billions of secure transactions every month, while continuing to ensure that consumers and small merchants remain protected,” it stated.
“As transaction volumes continue to grow, sustained investment in security, resilience, innovation, fraud prevention and infrastructure will remain essential to ensure that UPI continues to serve consumers and businesses reliably for years to come,” it added.
