The Ministry of Finance announced on Saturday, 8 August 2026 that users will continue to enjoy free UPI transactions. While person‑to‑person transfers remain free, the government signalled that any future MDR would apply only to a limited set of merchant payments above a defined threshold and at a nominal rate.
Key Developments
- The amendment to the Payment and Settlement Systems Act (PSS Act) received President’s assent.
- If the Taxation and Other Laws (Amendment) Bill, 2026 passes, the NPCI-led UPI and Services Steering Committee will decide the MDR.
- The proposed MDR will be threshold‑based, not a blanket charge on all transactions.
- All person‑to‑person digital payments network transactions will stay free.
- The move aims to create a sustainable revenue model as transaction volumes surge and the system needs continual upgrades in cybersecurity and infrastructure.
Important Facts
In July 2026, UPI processed 2,366 crore transactions worth ₹29.9 lakh crore. The platform is live in 11 foreign countries, with several more showing interest. The government emphasised that reliance on subsidies alone is not viable for the next wave of growth.
Exam Relevance
Understanding the regulatory framework of electronic payments is essential for GS‑III (Economy) and GS‑II (Polity). The amendment illustrates how the government balances financial inclusion with fiscal sustainability. Aspirants should note the role of the NPCI as a quasi‑governmental body and the legislative process involving the Parliament and the President.
Way Forward
The government will monitor transaction volumes and may introduce a modest MDR only for high‑value merchant payments. Continuous investment in cybersecurity, fraud prevention, and infrastructure is expected. Stakeholders are urged to rely on official communications from the Ministry of Finance, RBI and NPCI to avoid misinformation.