UPI stays free for users, small merchants shielded from MDR: Payments Council
Payments Council of India says UPI remains free for consumers and small merchants, clarifying merchant charges are commercial arrangements.
The Payments Council of India (PCI) has moved to quell concerns over the future cost of digital payments, asserting that UPI will remain free for consumers and that small merchants will not bear any charges for accepting payments through the platform.
In a statement on social media, the industry body clarified that any merchant service charges are purely commercial agreements between businesses and payment service providers. "They do not mean that consumers pay to use digital payments," the PCI said, adding that such fee structures are a standard feature of digital payment ecosystems worldwide.
The clarification follows the passage of the Taxation and Other Laws (Amendment) Bill, 2026, in the Lok Sabha. The legislation, moved by Finance Minister Nirmala Sitharaman and passed by voice vote, empowers the government to levy a Merchant Discount Rate (MDR) on select electronic payment modes. Reports suggest a potential MDR of 0.25 per cent to 0.4 per cent could apply to business-directed UPI transactions above Rs 2,000, while person-to-person payments remain unaffected.
Addressing concerns about the platform's sustainability, the PCI highlighted that UPI has grown into the world's largest real-time payment system since its launch in 2016. Operating this national infrastructure requires continuous investment in technology, cybersecurity, compliance, fraud prevention, and customer support. These costs are currently borne by ecosystem participants, including banks and payment service providers, to ensure a seamless user experience.
The council emphasised that small shopkeepers and kirana stores remain fully protected from paying any MDR charges to accept UPI. "Small merchants are not required to pay any charges to accept UPI payments," the PCI stated, underscoring that protecting small businesses remains central to the ecosystem's inclusive growth.
The body also noted that the recent discussions on charges stem from the platform's rapid expansion. "As the ecosystem continues to expand, discussions are taking place on how to sustainably support the infrastructure that enables billions of secure transactions every month," the PCI said, reiterating that consumers and small merchants will continue to remain protected.