UPI To Carry 0.4% Charge On Merchant Transactions Above Rs 2,000; Person-To-Person Payments Stay Free

Only a small share of UPI transactions by volume cross Rs 2,000, though they account for the majority of total transaction value

PGurus Newsdesk

September 15, 2026

Four years after scrapping UPI fees entirely, the government reintroduces a merchant charge above Rs 2,000, with consumers explicitly protected

UPI Fees Return For Big Transactions

Finance Ministry notification legally protects UPI and RuPay debit transactions up to Rs 2,000 from any charge, while merchant payments above that threshold could attract an MDR of up to 0.4%

The Finance Ministry has notified that no bank or payment system provider can impose any charge, direct or indirect, on UPI and RuPay debit card transactions up to Rs 2,000 — giving statutory protection to the vast majority of everyday digital payments. At the same time, merchant transactions above that threshold could soon attract a Merchant Discount Rate (MDR) of up to 0.4%, marking the most significant shift in UPI’s fee structure since the government scrapped MDR entirely in January 2020.

What The Notification Actually Says

The notification is explicit: no bank or system provider can, whether directly or indirectly, charge a person making or receiving a payment through the specified modes below the Rs 2,000 mark. That protection covers the overwhelming bulk of UPI’s volume — government data shows only about 4-5% of person-to-merchant UPI transactions cross Rs 2,000, though those transactions account for anywhere between 65-70% of total transaction value, which is precisely why the government is targeting that segment for a fee rather than the broader user base.

Where The 0.4% Figure Comes From

The push to reintroduce MDR follows amendments to Section 10A of the Payment and Settlement Systems Act, which removed the earlier blanket zero-MDR provision and handed the government discretion to specify which payment modes stay free. Multiple reports citing government sources have pointed to a proposed levy in the 0.25%-0.4% range for merchant transactions above Rs 2,000, with the final rate expected to be decided by an NPCI-led UPI and Services Steering Committee. Large merchants, particularly those with annual turnover exceeding Rs 1.5 crore, are expected to bear the charge, while smaller businesses are likely to remain exempt.

Consumers Are Protected, Merchants Aren’t

Finance Minister Nirmala Sitharaman has repeatedly stressed that any MDR would apply only to merchants, not the customers paying them, and that businesses would not be permitted to pass the cost on to consumers. She has also framed the move as necessary to help banks and fintechs invest in payment infrastructure, innovation and security — investments she says will ultimately benefit all UPI users. The clarification follows weeks of political pushback, including from Congress leader Jairam Ramesh, who argued the move opened the door for costs to eventually land on ordinary users despite the government’s assurances.

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