Govt notifies fee on UPI; user charge to be applicable on transactions over ₹2000

Scanning the barcode and making payments will not be free anymore. User charge will be applicable on UPI transactions over ₹2000.

The Central Government has notified amendments in the Payments and Settlement Act, 2007 mandating no charges on UPI transactions up to ₹2000. The move essentially means that small value UPI transactions will not attract any charges, but UPI payments or receipts more than ₹2000 will invite charges. 

What does the govt notification say?

"In exercise of the powers conferred by section 10A of the Payment and Settlement Systems Act, 2007 (51 of 2007), the Central Government hereby specifies the following electronic modes of payment, namely:– (i) Debit Card powered by RuPay; and (ii) Unified Payments Interface (UPI) transactions up to ₹2,000,” said the gazette notification issued by the ministry of finance last night.

“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 in paragraph above,” the notification added.

The move paves the way for merchant discount rate (MDR) charges on high value UPI transactions. MDR is a fee that a business (merchant) pays to a bank or payment system provider for digital payments from customers. Going forward, NPCI will decide on the quantum of charges to be imposed on UPI transactions over ₹2000.

Under the section of the Act earlier, the government prohibited banks and payment providers from imposing any direct or indirect charges on UPI transactions up to ₹2,000 and RuPay debit card payments. Under the earlier provisions, neither the person making the payment nor the person receiving it can be charged transactions charges by banks or payments system providers. 

Ever since UPI was launched in the wake of demonetisation, the no regime propelled UPI into a runaway success. It has now become significant pillar of India’s digital economy. It is, however, not clear whether merchant transactions over ₹2000 will be chargeable, and person-to-person (P2P) transactions will remain free.

It may be noted that the annual UPI transactions have registered a massive growth form 1.78 crore in FY17 to over 24,162 crore in FY26. Transaction value has jumped from ₹0.07 lakh crore to ₹314 lakh crore.