Will you have to pay to use UPI?
7 FAQs on possible MDR and what it means for consumers answered
Aug 07, 2026
Will you now have to pay charges for your UPI transactions? That’s the big question that many are asking after the Lok Sabha cleared a Bill amending the Payment and Settlement Systems Act, 2007, enabling the government to authorise banks and other payment service providers to impose charges on transactions carried out through the Unified Payments Interface (UPI) and other electronic payment modes that may be notified.
The amendment removes the existing legal restriction that bars banks and payment service providers from collecting Merchant Discount Rate (MDR) on notified electronic payment modes.
The Times of India reported that the government is expected to permit a Merchant Discount Rate (MDR) of between 0.25% and 0.4% on UPI transactions above Rs 2,000 made to businesses, while person-to-person payments are likely to remain outside the scope of the proposed levy.
The proposal is not expected to affect routine purchases such as milk, vegetables, groceries or payments for auto-rickshaw and taxi services.
Finance Minister Nirmala Sitharaman on Thursday said the Merchant Discount Rate on digital payment transactions is applicable to merchants rather than customers, adding that the levy would enable banks and fintech companies to strengthen investment in infrastructure and security.
Charges on UPI transactions: FAQs
In case you are wondering what the charges are about and who will pay, here are seven FAQs answered by the Payments Council of India, a non-government organisation.
1. Will I have to pay to use UPI?
No. UPI has always been free for consumers since its launch in 2016. Every Indian can continue making instant digital payments without paying any transaction charges.
2. Will small shopkeepers or kirana stores be charged for accepting UPI?
No. Small merchants are not required to pay any charges (MDR) to accept UPI payments. UPI was designed to make digital payments accessible for even the smallest businesses across India, and protecting small merchants remains central to the ecosystem's inclusive growth.
Who pays for your UPI?
3. Why is there a discussion around UPI charges now?
UPI has evolved from a new payment platform into the world's largest real-time payment system. As the ecosystem continues to expand, discussions are taking place on how to sustainably support the infrastructure that enables billions of secure transactions every month, while continuing to ensure that consumers and small merchants remain protected.
For nearly 10 years, banks, payment companies, fintechs, NPCI and RBI have collectively invested in technology, cybersecurity, fraud prevention, innovation and customer support to build one of the safest and most reliable payment systems in the world.
These investments continue every day to keep UPI secure, resilient and available 24×7.
5. If UPI is free, who bears the cost of operating it?
Operating a national payment infrastructure involves continuous investment in technology, fraud prevention, cybersecurity, compliance, customer support and innovation.
These costs are currently borne by ecosystem participants including banks and payment service providers who continue to invest so consumers can enjoy a safe, secure and seamless payment experience.
6. Would consumers have to pay if large merchants pay for payment acceptance?
No. Merchant service charges, where applicable, are commercial arrangements between merchants and payment service providers. They do not mean that consumers pay to use digital payments.
Across the world, merchant service charges are a standard feature of digital payment ecosystems, while consumers continue to enjoy convenient and secure digital payment experiences.
7. Why is sustaining the UPI ecosystem important?
UPI has become critical national digital infrastructure used by hundreds of millions of Indians every day.
As transaction volumes continue to grow, sustained investment in security, resilience, innovation, fraud prevention and infrastructure will remain essential to ensure that UPI continues to serve consumers and businesses reliably for years to come.
[The Times of India]
