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For millions of Indians, paying through UPI (Unified Payments Interface) has become a routine part of everyday life. A quick scan of a QR code, entering a PIN and the payment is complete.
However, a recent government notification raised questions about whether users could eventually be charged for making high-value UPI payments. The Centre, through a notification under the Payment and Settlement Systems Act, 2007 on Monday, specified UPI transactions up to ₹2,000 and payments made using RuPay-powered debit cards as electronic modes of payment on which banks and payment system providers cannot impose charges.
The notification states that no bank or system provider can impose a charge, either directly or indirectly, on a person making or receiving a payment through these specified modes.
This means UPI payments up to ₹2,000 remain protected from such charges. The same applies to payments made using RuPay debit cards.
Does this mean UPI payments above ₹2,000 will now be charged?
No, not automatically. The notification does not say that consumers will have to pay a fee whenever they make a UPI payment above ₹2,000.
Instead, it creates a framework under which charges could be introduced for certain transactions. The final decision on whether charges will apply above the threshold, and what the rate would be, will be taken by the UPI and Services Steering Committee headed by the Payments Corporation of India (NPCI).
What is MDR and why is it important?
MDR, or Merchant Discount Rate, is a fee charged for processing a digital payment. It is generally paid by the merchant to banks and payment service providers involved in processing the transaction.
At present, merchants do not pay MDR for accepting UPI payments. This is different from some other digital payment methods, such as debit and credit cards, where merchants generally pay processing fees.
The government had earlier indicated that any MDR introduced on UPI would be limited to a select group of merchant transactions above a certain threshold. It has also said that such a fee would be lower than the rates charged for credit and debit card payments.
If MDR is introduced, will customers have to pay more?
Not necessarily. If MDR is introduced, the charge would primarily apply to the merchant or the payment ecosystem for processing the transaction. It does not automatically mean that a customer making a ₹5,000 UPI payment will see an additional amount deducted from their bank account.
The government has maintained that UPI payments for consumers will remain free.
The exact structure of any future charges, including which merchants or transactions could be covered, will depend on subsequent decisions by the relevant authorities.
What does this mean for ordinary UPI users?
For everyday users, there is no immediate change to the way UPI payments work.
A person paying ₹500, ₹1,500 or ₹2,000 through UPI does not have to pay a transaction fee to a bank or payment system provider under the protection specified in the latest notification.
Even for a payment of ₹5,000 or ₹10,000, there is currently no government-announced consumer fee that automatically applies because the transaction is above ₹2,000. The key point is that ₹2,000 is not a new maximum limit for free UPI payments.
