India’s Payments Council has confirmed that consumers and small merchants will continue to use the UPI system without transaction fees, despite recent legislative changes that could allow future MDR charges, amid ongoing policy discussions.
India’s Payments Council has moved to calm growing speculation around UPI charges, saying consumers and small merchants will continue to use the system without paying transaction fees even as Parliament’s latest amendment has reopened debate over how the network should be funded.
In a clarification posted on social media and echoed in comments reported by Business Today, the council said UPI has remained free for consumers since its launch in 2016 and that small businesses are not being asked to pay the Merchant Discount Rate, or MDR, to accept payments. MDR is the fee merchants pay to banks or payment firms for processing digital transactions, but the council stressed that this does not mean users will be charged to send money.
The renewed discussion follows the passage of the Payment and Settlement Systems (Amendment) Bill, 2026 in the Lok Sabha. The change does not impose any new fee straight away, but it removes a legal bar that had prevented banks and payment providers from levying MDR on notified digital payment modes, including UPI. The law now gives the central government power to decide later which payment methods, if any, could attract charges.
That has intensified a wider policy argument over the long-term economics of India’s instant payments network. Industry participants say the system’s scale requires continuing spending on technology, fraud prevention, compliance and customer support, while critics warn that any move towards MDR could eventually filter down to smaller merchants or even consumers. Reserve Bank of India governor Sanjay Malhotra has said it is too early to talk about such a levy, though he has argued that the infrastructure must ultimately be financed either by users or through taxpayer support.
For now, the council says the core promise remains unchanged: everyday UPI transfers stay free, and small merchants will not be charged to accept them. Some payment firms do still impose business-side platform fees for processing, security and settlement, but those are separate from consumer charges and do not apply to ordinary bank-to-bank UPI payments.
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