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Government says UPI payments will remain free for consumers
Our read
UPI stays free for consumers, but a narrowly targeted merchant MDR will create a two-tier payments market: UPI remains dominant for everyday retail while larger merchants optimize high-value checkout toward lower-cost or fee-offsetting alternatives.
For operators
Consumer UPI remains a frictionless payment rail, while any future merchant fee exposure appears limited to threshold-based transactions and remains subject to legislative and NPCI approval.
Watch
Text and passage timeline of the proposed 2026 amendment.
The report,
Government said UPI person-to-person payments will remain free for consumers. Any merchant discount rate would apply only to limited, threshold-based merchant transactions at nominal rates, with NPCI’s steering committee to decide after the proposed law is passed.
Channel facts
From the report. Source details below
| Free for merchants and citizens since January | 2020 |
|---|---|
| Taxation and Other Laws (Amendment) Bill, | 2026 |
| Section 10A of the Payment and Settlement Systems Act, | 2007 |
Other figures
- UPI launched in 2016
What it means for online and offline
Payments platforms should preserve zero-cost consumer propositions while assessing partnership and pricing opportunities around potential threshold-based merchant charges.
Signals to track
- NPCI steering committee decision, especially merchant eligibility, transaction-value thresholds, and MDR caps.
- Whether charges apply by merchant turnover, transaction size, category, payment instrument, or settlement type.
- Government commitments on bank and PSP reimbursement for zero-MDR UPI transactions.
- Large retailer, marketplace, and payment-aggregator responses, including checkout steering or surcharge policies.
- Changes in UPI merchant growth, high-ticket transaction mix, and card-versus-UPI share after policy details emerge.
Likely next moves
Our read of what comes next — analysis, not reported by the source.
- Model payment-cost exposure by transaction value, merchant turnover, channel, and UPI share rather than assuming a uniform MDR.
- Prepare checkout routing rules for high-value purchases, including card, EMI, account-to-account transfer, and UPI alternatives.
- Review merchant contracts and marketplace seller terms for the ability to pass through or absorb payment acceptance costs.
- Prioritize UPI-linked loyalty, offers, and conversion flows for low-ticket and repeat purchases, where free consumer usage should sustain volume.
- Engage acquiring banks, PSPs, and payment aggregators on likely threshold definitions, pricing mechanics, and implementation timelines.
The counter-case
The case against this reading — not reported by the source.
The clarification preserves the headline of free consumer UPI, but it may create a two-tier system in which costs migrate to merchants and are eventually passed through as higher prices, convenience fees, or reduced discounts. A nominal, threshold-based MDR could also establish a policy precedent for broader monetisation later, while the proposed amendment and NPCI decision leave material execution and timing risk. If fees remain too low or narrowly applicable, banks and payment providers may still lack sustainable incentives to invest in reliability, fraud controls, and merchant acceptance.