Government Bars Banks from Charging on UPI Transactions up to ₹2,000

The Central government has barred banks and system providers from charging users for UPI transactions of up to ₹2,000 and payments made through RuPay-powered debit cards, as per news reports.  

The Finance Ministry issued a gazette notification under the Payment and Settlement Systems Act, 2007. 

No Charges on UPI Payments Upto ₹2,000 

The notification lists RuPay-powered debit cards and UPI transactions of up to ₹2,000 as “electronic modes of payment”. It states that no bank or system provider can impose a direct or indirect charge on a person making or receiving a payment through these modes. 

This comes a month after Parliament passed amendments to the Payment and Settlement Systems Act. The amendments gave the government legal backing to make changes to the zero-MDR framework for UPI and RuPay card transactions. 

UPI Network Expands 

The number of banks live on UPI has risen from 44 in FY2016-17 to 703 in FY2025-26. The number stood at 741 in July 2026, according to government data. 

Monthly UPI transactions crossed 2,300 crore for the first time in May 2026, reaching 2,320 crore. The number increased to 2,366 crore in July. Annual transaction volume grew 30% in FY2025-26, while transaction value rose 21%. 

Merchant Payments Dominate Volume 

UPI transactions increased from 1.78 crore in FY2016-17 to more than 24,162 crore in FY2025-26. UPI accounted for 84% of India's digital payments in FY2025-26. 

Person-to-merchant transactions made up 63% of total UPI transaction volume. Of these merchant payments, 86% were below ₹500 in FY2026. Person-to-person transactions accounted for 37% of volume but 71% of total transaction value. 

MDR Framework 

In August 2026, the government opened the possibility of a nominal Merchant Discount Rate on a limited set of UPI merchant transactions above a certain threshold.  

Finance Minister Nirmala Sitharaman said MDR applies to merchants rather than customers and would support banks and fintech companies in spending on infrastructure and security. 

Read More: Cabinet Clears 8 Rail Multitracking Projects Worth ₹20,804 Crore Across 9 States! 

Conclusion 

The notification confirms that UPI payments of up to ₹2,000 and RuPay-powered debit card payments cannot attract direct or indirect charges. The government has also stated that consumers and person-to-person UPI payments will remain free. 

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