Will UPI Payments Above ₹2,000 Attract Charges? Finance Minister Explains Proposed MDR Framework

Finance Minister Nirmala Sitharaman has clarified that the government has not taken a decision to introduce Merchant Discount Rate (MDR) on UPI transactions. Her clarification follows concerns over the proposed amendments to the Payment and Settlement Systems Act, 2007, which could allow the government to specify digital payment modes eligible for charges in the future. 

Responding to concerns raised on social media, the finance minister said that even if MDR is introduced in the future, it would apply to merchants and not end users, adding that no decision has been taken yet. 

Will UPI Users Have to Pay a Fee? 

No. According to the Finance Minister, UPI users will continue to make payments without being charged directly. 

She clarified that Merchant Discount Rate (MDR) is a fee paid by merchants for accepting digital payments and does not apply to customers making payments through UPI. 

The proposed amendment only creates the legal framework that would allow the government to notify digital payment modes for MDR, if required. It does not automatically introduce any fees. 

Has the Government Decided to Introduce MDR? 

No. Sitharaman said that the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), is yet to take a decision on MDR. 

She also noted that any such move can be considered only after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, which proposes amendments to the Payment and Settlement Systems Act. 

Why Is MDR Considered? 

According to the finance minister, an MDR framework could help banks, fintech companies and payment service providers invest more in: 

The government says strengthening the payment ecosystem requires sustainable funding for institutions that process digital transactions. 

Read More: UPI Transaction Volume and User Adoption Metrics Experience Slowdown; Average Daily Growth Rate Drops to 24% 

Who May Have to Pay MDR Under the Proposal? 

While the government has not announced any proposal, media reports suggest that different options are under discussion. 

These include: 

However, no official proposal on the rate, transaction threshold, or eligible merchants has been notified. 

What Should UPI Users Know Now? 

For now, nothing changes for customers using UPI. 

There is no MDR on UPI transactions, and no fee has been approved. Any future change would require: 

Conclusion 

The finance minister has clarified that the government has not introduced MDR on UPI transactions. The proposed legislative amendment only enables the government to notify digital payment modes for such charges in the future. If MDR is implemented, it is expected to apply to eligible merchants rather than customers, though no final decision has been taken. 

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