India is contemplating a landmark shift in its digital payment landscape, potentially allowing banks and firms to charge fees on high-value UPI transactions, signalling a new phase in the country’s cashless ecosystem.
India may be edging towards a small but symbolically important change in how UPI is funded. Finance Minister Nirmala Sitharaman’s Taxation and Other Laws (Amendment) Bill, 2026 would amend the Payments and Settlement Systems Act, 2007 in a way that could let banks and payment firms levy fees on UPI and RuPay debit card transactions. The practical point is not that every digital payment will suddenly cost money, but that the ecosystem that has long absorbed the cost of instant payments may finally be allowed to recover some of it.
That matters because UPI has become the country’s default way to pay for everything from groceries to taxis, and the system is enormous. Indian Express has reported that more than 24,000 crore UPI transactions worth Rs 314 lakh crore were carried out in 2025-26. Even so, the likely charge is expected to be narrow in scope. Industry voices quoted by Indian Express said any merchant discount rate, or MDR, would probably apply only to larger merchants and mostly to higher-value payments, rather than to the everyday low-value transactions that most consumers make.
There is no consensus yet on what the fee, if any, should look like. Sridhar Guntuku of Decentro told Indian Express that a rate of 0.3%-0.6% on UPI payments for large merchants would be reasonable, while Mehul Mistry of Zeta pointed to discussion around a much smaller 0.05%-0.07% charge for merchants with annual turnover of at least Rs 1 crore-Rs 1.5 crore. The difference matters because it would shape who pays and how much. For context, credit cards typically carry MDRs of 1%-3%, while debit cards can attract charges of up to 0.9%.
The policy debate is also about scale. A March report by Parliament’s Standing Committee on Finance said the government incentive scheme for digital payments covered only 11% of the industry’s cost of running the system, implying an annual burden of close to Rs 20,000 crore. That is the gap banks and payment providers have been pointing to for years. At the same time, the government has been careful before: in August 2025, the Finance Ministry said there was no proposal to charge UPI users after fresh concern was triggered by remarks from RBI Governor Sanjay Malhotra.
For most users, the immediate takeaway is that low-value payments still look likely to remain free. The draft idea being discussed would focus on larger transactions, especially those above Rs 2,000, where Indian Express said only a small share of person-to-merchant UPI payments fall even though they account for a large slice of total value. If charges are introduced, the more important question for households may be whether merchants absorb them or quietly pass them on in prices, just as happens elsewhere in the payments chain. That is why the debate is less about a swipe fee on a phone screen and more about who ultimately pays for India’s digital checkout.
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