The Payments Council of India (PCI) on Friday sought to allay concerns over possible charges on Unified Payments Interface (UPI) transactions, saying the payment system will continue to remain free for consumers and small merchants.
The clarification came amid growing debate after the Lok Sabha passed legislation amending the Payment and Settlement Systems Act, 2007, giving the government the power to permit charges on notified electronic payment modes, including UPI.
Consumers will not pay
PCI said UPI has remained free for consumers since its launch in 2016 and maintained that individuals will continue to be able to make instant digital payments without paying transaction charges.
The industry body stressed that the ongoing discussion over Merchant Discount Rate (MDR) should not be interpreted as a move to impose charges on ordinary UPI users.
The clarification assumes significance given UPI's widespread adoption for everyday transactions, ranging from peer-to-peer transfers to payments at shops, restaurants and other businesses.
Small merchants also protected
PCI said small businesses, including kirana stores and neighbourhood merchants, will also continue to accept UPI payments without paying MDR.
MDR is a fee generally paid by a merchant to banks and payment service providers for processing digital transactions. The current debate, according to the industry body, concerns the creation of a sustainable financial model for the payments ecosystem rather than charging consumers or small businesses.
What changed in Parliament
The clarification follows the passage of the Taxation and Other Laws (Amendment) Bill, 2026, by the Lok Sabha on August 6.
The legislation amends the Payment and Settlement Systems Act, 2007, removing the blanket statutory restriction on charges for certain electronic payment modes. It gives the government the flexibility to permit charges on notified payment systems in the future.
However, the amendment itself does not automatically introduce a charge on every UPI transaction. Any such fee structure would require a subsequent government decision or notification.
Debate over large merchants
The payments industry has been seeking a sustainable revenue mechanism for operating UPI, particularly for transactions involving large merchants.
PCI has argued that maintaining and expanding the digital payments infrastructure involves significant expenditure on technology, cybersecurity, fraud prevention and system resilience. With UPI transaction volumes continuing to rise, the industry says investment in these areas will also have to increase.
The debate has therefore largely centred on whether large merchants should pay a nominal MDR while consumers and smaller businesses remain protected from charges.
Sitharaman explains MDR
Finance Minister Nirmala Sitharaman has also sought to distinguish between charges imposed on merchants and those imposed on customers.
MDR, she explained, is a merchant-side charge rather than a fee paid by consumers making digital payments. The mechanism can provide resources for maintaining and improving the infrastructure required to process rapidly growing volumes of electronic transactions.
Focus on sustainable UPI
PCI said the objective is to ensure that India's digital payments infrastructure remains financially sustainable without compromising the accessibility that helped UPI achieve mass adoption.
The industry body maintained that any discussion around a sustainable commercial model should preserve free access for consumers and protect small merchants who have become heavily dependent on QR-based payments.
For ordinary users, PCI's message was clear: UPI payments will continue to remain free, despite the legislative changes that have reopened the wider debate over how India's rapidly expanding digital payments infrastructure should be funded.