FINANCE

India’s Centre Bars Charges on UPI Payments up to ₹2,000, Extends Free‑Use to RuPay Debit Cards

The Finance Ministry issued a notification on September 14 that prohibits banks and payment system providers from levying any direct or indirect fee on UPI transactions of ₹2,000 or less and on RuPay‑debit‑card payments. The move codifies the zero‑MDR model for low‑value digital payments while leaving the fee structure for higher‑value UPI transactions undecided.

By Open Vaartha Desk · 2026-09-15

What happened

TL;DR

UPI and RuPay debit‑card payments up to ₹2,000 are now legally protected from any transaction fee in India.

Key points

The Finance Ministry’s September 14 notification bans banks and payment‑system providers from charging any fee on UPI transactions of ₹2,000 or less and on RuPay debit‑card payments.
The protection applies only to low‑value transactions; no fee structure is defined for UPI payments above ₹2,000.
Government data show UPI handled 2,366 crore transactions worth ₹29.9 lakh crore in July 2026, highlighting its ubiquity.
In FY 2024‑25 the government approved a ₹1,500‑crore incentive for low‑value BHIM‑UPI merchant transactions, and payouts to support RuPay and BHIM‑UPI rose from ₹1,389 crore (FY 2021‑22) to ₹3,631 crore (FY 2023‑24).
The move codifies the zero‑MDR model for small digital payments while leaving the fee regime for higher‑value UPI transactions undecided.

The Ministry of Finance formally notified that, under Section 10A of the Payment and Settlement Systems Act, 2007, banks and payment‑system providers are barred from imposing any direct or indirect charge on Unified Payments Interface (UPI) transactions of up to ₹2,000. The same protection applies to payments made with RuPay‑powered debit cards.For everyday users the implication is straightforward: a UPI payment of ₹2,000 or less – whether sent to a shopkeeper, used for grocery purchases, or transferred to a friend – will not attract a transaction fee from the bank or the payment‑system provider. The no‑charge provision also covers RuPay debit‑card payments of the same low‑value range.The notification does not extend the fee‑free guarantee to UPI transactions above ₹2,000. It merely preserves the zero‑MDR regime for the specified low‑value bracket and does not prescribe a Merchant Discount Rate (MDR) for larger payments. Earlier this year the government amended the legal framework to allow future specification of payment modes on which charges could be levied. In August 2026 the Finance Ministry clarified that consumers would not be charged for ordinary UPI transactions and that any future MDR would apply only to a limited category of merchant transactions above a defined threshold. Consequently, the September 14 notice should not be read as an indication that UPI payments exceeding ₹2,000 will now be charged.The ₹2,000 ceiling targets the segment of digital commerce that dominates everyday transactions. Government data show that in July 2026 UPI processed 2,366 crore transactions worth ₹29.9 lakh crore, underscoring its deep penetration in the Indian economy. To sustain this ecosystem, the government has historically offered incentive schemes for low‑value BHIM‑UPI person‑to‑merchant payments. For FY 2024‑25 a ₹1,500‑crore incentive was approved, specifically covering transactions up to ₹2,000 at small merchants.Operating a nationwide real‑time payment network incurs significant costs for banks, payment service providers, and technology firms, including infrastructure, cybersecurity, fraud prevention, and processing expenses. The government has shouldered a growing share of these costs, with payouts to support RuPay and BHIM‑UPI rising from ₹1,389 crore in FY 2021‑22 to ₹3,631 crore in FY 2023‑24. This raises a broader policy question: if users and most merchants do not pay, who ultimately finances the system? The government maintains that any future MDR, if introduced, would be limited and nominal rather than a blanket charge on all UPI transactions.For now, the September 14 notification provides certainty to consumers: UPI payments up to ₹2,000 and RuPay debit‑card payments remain free of direct or indirect charges. The larger debate over the long‑term financial sustainability of India’s rapidly expanding UPI ecosystem—and whether MDR will eventually apply to higher‑value merchant transactions—remains open for future policy deliberation. In practical terms, the message to the ordinary user is simple: scan, pay, and incur no transaction fee for amounts up to ₹2,000.