Overview
The Ministry of Finance has clarified that consumers will continue to use the UPI without any transaction fee. The government also says that only a small set of merchant transactions may attract a nominal MDR, and that this will be threshold‑based, not a blanket levy.
Key Developments
- All person‑to‑person (P2P) payments on UPI remain free for users.
- Any future MDR will apply only to merchant transactions above a specific threshold and at a rate lower than debit or credit‑card MDRs.
- The amendment to the PSS Act is an enabling provision, not a charge‑imposition measure.
- Once the Taxation and Other Laws (Amendment) Bill, 2026 is passed, the NPCI‑led UPI and Services Steering Committee will decide the exact MDR structure.
Important Facts
• In July 2026, UPI processed 2,366 crore transactions worth ₹29.9 lakh crore.
• UPI is live in 11 foreign countries and is being considered by many others.
• The system’s rapid growth demands continuous upgrades in cybersecurity, fraud detection and infrastructure.
Exam Relevance
Understanding the policy shift helps answer GS‑3 questions on digital payments, financial inclusion and fiscal sustainability. The amendment illustrates how the government balances subsidy‑free growth with a self‑sustaining revenue model, a recurring theme in Indian economic policy. It also highlights the role of statutory bodies like NPCI and the legislative process involving bills such as the Taxation and Other Laws (Amendment) Bill, 2026.
Way Forward
The government will monitor transaction volumes and emerging risks. If a nominal MDR becomes necessary, it will be limited to high‑value merchant transactions, preserving the core principle of a free‑to‑use system for citizens. Aspirants should track future notifications from the Ministry of Finance, the RBI, and NPCI for any updates on fee structures or regulatory changes.