The Government of India has clarified that consumers will continue to make UPI payments without transaction charges, while all person-to-person (P2P) transactions will remain completely free regardless of the amount transferred.
The clarification comes amid changes to the UPI Merchant Discount Rate (MDR) framework. The government has said that any MDR will apply only to specified merchant transactions above ₹2,000, rather than being charged to consumers. UPI apps are also prohibited from imposing platform fees or hidden charges on users.
Under the current framework, UPI merchant payments up to ₹2,000 remain free, while small merchants receiving up to ₹1 lakh per month through UPI QR codes under the P2PM category continue to receive zero-MDR treatment. The government estimates that around 96% of P2M transactions will remain unaffected.
For eligible higher-value merchant transactions, the MDR framework introduces a 0.4% rate, with a maximum charge of ₹300 for transactions of ₹75,000 or more. The government says the framework is intended to support the long-term sustainability, cybersecurity, infrastructure and resilience of India's rapidly expanding digital payments ecosystem.
UPI processed 2,366 crore transactions worth ₹29.9 lakh crore in the previous month, according to the government, underlining its growing importance to India's digital economy.
Why it matters: The move attempts to balance two priorities: keeping UPI free for consumers and small merchants while creating a funding mechanism for the infrastructure supporting India's enormous digital payments ecosystem.