Consumers and small businesses such as neighbourhood kirana stores will continue to make and accept UPI payments without transaction charges, the Payments Council of India (PCI) said on Friday.
The clarification comes amid concerns that a recent legislative change could pave the way for charges on UPI and other digital payment transactions.
The Lok Sabha has passed a Bill seeking to amend the Payment and Settlement Systems Act, 2007. The proposed changes would allow the government to notify circumstances under which banks and other payment service providers could levy charges on UPI and other specified electronic payment systems.
PCI, an industry body formed by the Internet and Mobile Association of India (IAMAI) in 2013, said consumers would continue to have access to free UPI transactions.
“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,” the council said in a post on X. It also clarified that small merchants would continue accepting UPI payments without paying a Merchant Discount Rate (MDR).
Why are UPI charges being discussed?
The debate has emerged over how to fund the rapidly expanding infrastructure behind India’s digital payments ecosystem while keeping UPI free for consumers and small businesses.
UPI has become one of the world’s largest real-time payment systems, requiring banks, fintech companies and payment service providers to continuously invest in technology, cybersecurity, fraud prevention, regulatory compliance and customer support.
Finance Minister Nirmala Sitharaman said on Thursday that MDR, where applicable, is a charge imposed on merchants rather than consumers. She said such a mechanism could help banks and fintech companies continue investing in the infrastructure and security required to support digital payments.
Responding to Congress leader Jairam Ramesh’s concerns that UPI users could eventually be charged, Sitharaman said the UPI and Services Steering Committee headed by the National Payments Corporation of India (NPCI) had not yet taken a decision on MDR.
She said any decision would come only after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026. Under the proposed framework, the Centre would have the authority to specify through notification the electronic payment modes or categories of transactions that would remain free.
Could larger merchants face charges?
While PCI has assured consumers and small merchants that they will not be charged for UPI transactions, its clarification leaves open the possibility of merchant service charges being introduced for larger businesses.
The council said such charges, if introduced, would be commercial arrangements between merchants and payment service providers and would not result in consumers being charged for making UPI payments.
“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,” PCI said. The council added that similar merchant charges are prevalent across digital payment systems in other countries.
Who pays for UPI infrastructure now?
At present, the cost of maintaining the UPI ecosystem is largely borne by banks and payment service providers. PCI said banks, fintech companies, payment firms, NPCI and the Reserve Bank of India have invested in the system for nearly a decade, including in technology, cybersecurity, fraud prevention, innovation and customer support.
As UPI transactions continue to grow and the platform is used by hundreds of millions of Indians, the industry body said a sustainable funding model would be necessary to maintain the network’s security, reliability and resilience. For consumers and small merchants, however, PCI reiterated that UPI payments will continue to remain free.