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UPI to remain free for consumers and most small merchants, Sitharaman says
Our read
UPI stays free at the neighborhood checkout, while policymakers prepare a monetization lane for large merchants and high-value payments.
For operators
UPI remains a zero-cost payment rail for consumers and most small merchants, preserving checkout economics while larger retailers should monitor any future threshold-based MDR rules.
Watch
Formation, mandate, and recommendations of the NPCI-led committee examining UPI MDR or transaction thresholds.
The report,
Finance Minister Nirmala Sitharaman said UPI will remain free for consumers and most small merchants. A proposed law enables the government to specify protected payment modes; any future MDR would be limited to merchant transactions above a prescribed threshold.
Channel facts
From the report. Source details below
| Payment and Settlement Systems Act, | 2007 |
|---|
Also in the report
- 2,366 crore UPI transactions
Other figures
- Section 10A
- 11 countries
- July 2026
- ₹29.9 lakh crore
What it means for online and offline
Payments partnerships can continue to position UPI as a low-cost acquisition and acceptance tool, with potential premium economics emerging only if threshold-based MDR is introduced for larger merchants.
Signals to track
- Government budget allocations and reimbursement announcements for UPI and RuPay payment infrastructure.
- NPCI circulars defining 'small merchant,' transaction-value cutoffs, merchant-category exclusions, or effective implementation dates.
- Bank, PSP, and fintech commentary on UPI transaction-cost recovery, incentive programs, and merchant onboarding economics.
- Any rise in large-merchant payment-method steering, minimum-order thresholds, or discounts linked to cards versus UPI.
Likely next moves
Our read of what comes next — analysis, not reported by the source.
- Maintain UPI as the default tender for small-format stores, with no near-term need to pass payment-acceptance costs to consumers.
- Segment UPI receipts by ticket size, merchant entity, and location now to estimate exposure under a future threshold-based MDR framework.
- Build checkout and reconciliation capabilities that can support payment-method steering or differentiated acceptance rules for high-value transactions if MDR is introduced.
- Negotiate acquiring, settlement, and value-added service contracts with an assumption that large-merchant UPI economics may be repriced before small-merchant economics.
- Use the policy clarity to accelerate QR deployment in underserved store formats, delivery fleets, and assisted-commerce touchpoints.
The counter-case
The case against this reading — not reported by the source.
The announcement may preserve adoption optics rather than resolve UPI’s underlying economics. Zero MDR leaves banks, PSPs and payment apps dependent on government subsidies or cross-selling, potentially constraining investment in fraud controls, uptime and merchant support. A future threshold-based MDR could also shift costs abruptly to growing small businesses, encourage transaction splitting, and create compliance complexity without generating enough revenue to fund the ecosystem.