Consumers, Small Merchants to Continue Enjoying Free UPI Services: Payments Council of India

Consumers, Small Merchants to Continue Enjoying Free UPI Services: Payments Council of India

New Delhi, Aug. 08 [VoM News]: Consumers and small merchants will continue to use Unified Payments Interface (UPI) services free of charge, the Payments Council of India (PCI) said on Friday, a day after the Lok Sabha passed amendments to the Payment and Settlement Systems Act, 2007.

VoM News has learnt that the clarification follows concerns that the amended law would lead to transaction charges for UPI users. In a statement, the PCI said UPI has remained free for consumers since its launch in 2016 and that individuals can continue making instant digital payments without paying any transaction fees.

The council also clarified that small merchants, including neighbourhood kirana stores, will continue to accept UPI payments without paying the Merchant Discount Rate (MDR).

The Lok Sabha on Thursday passed a Bill amending the Payment and Settlement Systems Act, 2007, empowering the Central Government to notify electronic payment modes or transactions on which banks and payment service providers may levy charges.

The PCI said the ongoing discussions are focused on creating a sustainable financial model for maintaining and expanding the UPI ecosystem while ensuring that consumers and small businesses remain protected.

Finance Minister Nirmala Sitharaman also clarified that the Merchant Discount Rate applies only to merchants and not to customers. She said any future MDR framework would support banks and fintech companies in strengthening payment infrastructure, cybersecurity and digital security.

Responding to concerns raised by Congress leader Jairam Ramesh, Sitharaman said the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), has not yet taken any decision regarding MDR. She added that any such decision would only be considered after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026.

According to the Payments Council of India, banks, payment companies, fintech firms, NPCI and the Reserve Bank of India (RBI) have invested for nearly a decade in developing UPI infrastructure, including technology, cybersecurity, fraud prevention, compliance, innovation and customer support.

The council said maintaining a national digital payment network requires continuous investment, with these costs currently being borne by participating banks and payment service providers.

It further clarified that even if merchant service charges are introduced for large businesses in the future, consumers will continue to use UPI without paying transaction fees. Merchant service charges, where applicable, would remain commercial arrangements between merchants and payment service providers and would not be passed on to customers.

The PCI emphasised that UPI has become one of the world’s largest real-time digital payment systems and that continued investment is essential to ensure its security, resilience and future growth.