New Delhi, Sep 15: The government has updated the regulatory framework for digital payments, ensuring that UPI transactions of up to ₹2,000 continue to remain free of charges while providing greater clarity around the treatment of larger merchant payments.
The move is significant as UPI has become one of the most widely used digital payment methods in the country, supporting everyday transactions between consumers, small businesses and service providers.
Under the notified provision, banks and payment system providers cannot directly or indirectly impose charges on UPI transactions up to ₹2,000 covered by the framework. RuPay debit card payments specified in the notification are also protected from such charges.
For consumers, the change means that routine low-value payments can continue to be made through UPI without an additional bank or system-provider fee. This includes payments at neighbourhood shops, grocery stores, food outlets, local service providers and other businesses.
The continuation of free small-value payments is particularly important for small merchants. Many local businesses receive a large number of low-ticket digital payments each day, and keeping these transactions free can help them manage costs while continuing to offer customers a convenient cashless payment option.
The revised framework also changes the earlier legal position on UPI charges. However, the notification does not itself introduce a Merchant Discount Rate (MDR) on UPI transactions above ₹2,000. Any future charges on larger merchant transactions would depend on subsequent policy and regulatory decisions.
The distinction is important for consumers and businesses because the revised provision should not be interpreted as an immediate charge on every UPI transaction above ₹2,000.
UPI has played an important role in expanding India’s digital economy by allowing consumers and businesses to make instant payments using mobile phones and QR codes. Its widespread use has also reduced dependence on cash for many everyday transactions.
For small and micro businesses, digital payments can make collections easier, reduce cash-handling requirements and create a digital record of transactions. Such records can also support greater participation in the formal financial system and potentially improve access to financial services.
From the consumer perspective, keeping low-value UPI payments free helps maintain the affordability and convenience that have contributed to the rapid adoption of digital payments across urban and rural markets.
At the same time, the growing scale of UPI has raised questions about the long-term sustainability of the infrastructure supporting the payment ecosystem. Banks, payment providers and technology companies need to maintain systems for transaction processing, security, fraud prevention and uninterrupted service.
The latest framework therefore seeks to strike a balance between keeping everyday digital payments affordable and providing greater flexibility for the future development of the payment ecosystem.
For now, the key takeaway for users is that UPI transactions up to ₹2,000 remain free under the notified provision. The treatment of larger merchant transactions remains a matter for further policy and regulatory decisions.
The move is expected to support continued digital-payment adoption while protecting consumers and small businesses from additional costs on routine, low-value transactions.