The government on Monday said banks cannot impose any charges on UPI transactions or RuPay debit card payments of up to Rs 2,000, but it left open the call on amounts above that.

This could pave the way for banks to levy charges on UPI (Unified Payments Interface) transactions above Rs 2,000. The final call on this and the magnitude of the merchant discount rate (MDR) will be taken by the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI).

For transactions up to Rs 2,000, the Finance ministry in a notification said 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 notification, made under the Payment and Settlement Systems Act, 2007, specified the electronic modes of payment under RuPay-powered debit cards and UPI transactions of up to Rs 2,000. Both RuPay and UPI are managed by the NPCI.

Since the notification made no mention of transactions above Rs 2,000, it seems that merchant discount rate (MDR) would be introduced on higher value UPI transactions.

The industry is expecting the government and NPCI to notify a specific fee that may be levied on UPI transactions, which may be a tiered charge of 0.3-0.5% for varying amounts of transactions.

MDR is the fee merchants pay to banks and payment service providers (PSPs) for processing digital payment transactions made by customers. Merchants currently do not pay for accepting UPI and RuPay-powered debit card payments, unlike other instruments such as debit or credit cards. The cost of such transactions is borne by banks, NPCI and PSPs. 

Last month, the Parliament passed amendments to the Act allowing the government to decide which digital payment methods may attract fees. It paved the way for the government to allow banks and PSPs to levy charges on UPI transactions and other notified digital payment modes.

Since the UPI platform has become the world’s largest real-time payment system, the PCI has been pushing for discussions 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”.

“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 stated.

The number of banks live on UPI has increased to 741 as of July 2026, from 44 in FY2016-17. Annual UPI transaction volumes have surged to over 24,162 crore in FY26, from 1.78 crore in FY2016-17. UPI accounted for 84% of India’s digital payments in FY2025-26, according to data released by the Ministry of Finance.

The UPI platform processed transaction value worth Rs 314.2 lakh crore in FY26, up from Rs 0.07 lakh crore in FY2016-17.

As of August 2026, UPI users had exceeded 55 crore.