UPI payments above Rs 2,000 to be charged; Centre issues notice
New Delhi: The Finance Ministry’s September 14 notification has raised fresh concerns over the future of free UPI payments, explicitly protecting UPI transactions of up to Rs 2,000 from direct or indirect charges while leaving higher-value transactions outside the same statutory protection, Reuters reported.
The notification specifies UPI transactions up to Rs 2,000 and RuPay-powered debit card payments as electronic modes on which banks and payment system providers cannot impose charges. But it does not guarantee that larger UPI transactions will remain free indefinitely. The change creates the possibility of charges on transactions above the Rs 2,000 threshold, even though no consumer fee has been announced yet, according to a Reuters report.
That uncertainty is significant for a payment system that has become part of everyday life for millions of Indians. A customer making a Rs 5,000 or Rs 10,000 UPI payment currently does not automatically pay a transaction fee, but the latest framework has raised questions about whether that could change in the future.
The government has sought to present the move as a means of creating a sustainable revenue model for the UPI ecosystem. The system now handles enormous transaction volumes, while banks and payment companies face rising infrastructure, cybersecurity and fraud-prevention costs. However, critics could question why users and businesses should ultimately bear the burden of maintaining a system that the government has long promoted as a free digital-payment revolution.
The debate is closely linked to the Merchant Discount Rate (MDR), a fee for processing digital payments. Government discussions have reportedly considered introducing MDR for selected merchant transactions above a certain threshold. Policymakers have considered an MDR of around 0.3% to 0.5% on transactions above Rs 2,000 for large merchants, according to Reuters.
The government has repeatedly maintained that UPI will remain free for citizens. According to the Press Information Bureau, the Finance Ministry said on August 8 that UPI would remain free for citizens and that any future MDR would be nominal and limited to a selected set of merchant transactions.
Business Standard had earlier reported that the proposed legal changes could allow MDR to be levied on certain UPI and RuPay debit card transactions, particularly those involving large merchants. The report also noted that the amendment itself did not immediately impose any charges but gave the government greater flexibility to decide which electronic payment methods would remain exempt from charges.
The latest notification has now drawn a clear legal line at Rs 2,000. While it does not impose a charge today, the move has created uncertainty about whether the promise of permanently free UPI payments could eventually give way to a system in which the cost is passed on to merchants, businesses, or the wider payment ecosystem.