THEBUSINESSBYTES BUREAU

NEW DELHI, AUGUST 8, 2026

The government on Saturday moved to dispel growing concerns over a possible levy on Unified Payments Interface (UPI) transactions, asserting that consumers and small merchants will continue to enjoy free UPI services even as a recent legislative amendment creates a framework for introducing charges on a limited category of merchant transactions.

The clarification comes two days after the Lok Sabha passed a Bill to amend the Payment and Settlement Systems Act, 2007, enabling the government to permit banks and other payment service providers to levy charges on UPI and other notified electronic payment modes. The government, however, said the provision should not be interpreted as an immediate move to impose charges on ordinary users.

 “Once the Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, which proposes to amend Section 10A of the Payment and Settlement Systems Act, 2007, the ‘UPI and Services Steering Committee’ headed by NPCI will decide on the MDR, if any,” the finance ministry said in a statement.

The ministry said any Merchant Discount Rate (MDR), if introduced, would be restricted to a limited set of merchant transactions crossing a specified threshold and would remain nominal.

 “They will apply only to a limited set of merchant transactions, above a certain threshold, at a nominal rate, far lower than debit or credit card MDRs,” the finance ministry said in a statement.

The government said the amendment is essentially an enabling provision aimed at ensuring the long-term sustainability, technological advancement and resilience of UPI rather than a move to burden consumers with transaction fees.

The rationale assumes significance as UPI transaction volumes have expanded rapidly, requiring sustained investments in cybersecurity, fraud prevention and payment infrastructure. According to the government, the ecosystem also needs a viable revenue model to support further market expansion and encourage more companies to participate in the digital payments landscape.

 “Reliance on subsidies alone is not viable for the next wave of growth,” the government said, arguing that a balanced framework is needed to keep UPI robust, inclusive and future-ready.

The ministry also rejected speculation that external pressure or foreign interests had influenced the policy shift, describing such narratives as “unfounded, completely false and misleading.” It pointed to the government’s decision to introduce UPI in 2016 and subsequently keep transactions free for citizens and merchants since January 2020 as evidence of its long-term commitment to the platform.

The government said UPI is now entering a fresh phase of expansion, particularly across rural and semi-urban markets, making financial sustainability increasingly important. It maintained that affordability and self-sustainability would need to go hand in hand as India seeks to retain its competitive edge in digital payments.

Since its launch in 2016-17, UPI has evolved from an experiment in real-time interoperable payments into a critical pillar of India's digital economy. In July 2026 alone, the platform processed 2,366 crore transactions worth Rs 29.9 lakh crore, according to the government.

UPI has also expanded internationally and is currently live in 11 foreign countries, with several other nations expressing interest in adopting or integrating the payment infrastructure.

The government said UPI remains an Indian innovation and reiterated its commitment to keeping the service free for citizens while building a financially sustainable ecosystem capable of supporting growth for decades.

The amendment to the PSS Act, it said, should therefore be viewed as a forward-looking measure designed to ensure that UPI remains secure, affordable, inclusive and globally competitive as India's digital economy enters its next phase of expansion.