No bank charges on UPI payments up to Rs 2,000, government notifies new rules

The Centre has formally notified changes to the Payment and Settlement Systems Act, making it clear that banks and payment system providers cannot levy charges on certain low-value digital payments.

Under the new notification, UPI transactions of up to Rs 2,000 and payments made through RuPay-powered debit cards have been designated as electronic modes of payment on which no direct or indirect charge can be imposed on the person making or receiving the payment.

Low-value UPI payments to remain free

The government gazette notification specifies that neither banks nor system providers can charge a person for making or receiving a payment through the designated electronic modes.

The provision covers UPI transactions up to the Rs 2,000 threshold as well as transactions carried out using RuPay debit cards. The move is aimed at keeping everyday, low-value digital payments affordable and encouraging wider adoption of electronic payment systems.

The latest notification comes amid changes to the legal framework governing charges on digital payments. Earlier amendments had created the possibility of the government determining which electronic payment modes would remain protected from charges through subsequent notifications.

Users will not bear UPI transaction charges

The government had earlier clarified that consumers making UPI payments would not face transaction charges. It also said person-to-person UPI transfers would continue to be free.

The Finance Ministry had said any future Merchant Discount Rate, or MDR, would be applicable only to a limited category of merchant transactions above a specified threshold and at a nominal rate. The vast majority of merchant transactions would continue to remain free, it said.

MDR is a fee associated with processing digital payments and is generally linked to the merchant side of a transaction rather than a charge imposed directly on consumers.

UPI has expanded rapidly

The government has been using incentive schemes to support low-value UPI transactions and encourage digital payments. Under the 2024-25 incentive scheme, transactions of up to Rs 2,000 made to small merchants were eligible for an incentive of 0.15% of the transaction value, while the transactions themselves remained subject to zero MDR.

The government has also previously stated that UPI has become a major part of India's digital payments ecosystem. According to the Ministry of Finance, UPI processed 2,366 crore transactions worth Rs 29.9 lakh crore in July 2026 alone and is now operational in 11 foreign countries.

The latest notification therefore provides a clearer legal framework for keeping low-value UPI payments and RuPay debit card transactions free for users, while allowing the government to determine the treatment of other categories of digital payments.