UPI payments up to ₹2,000 remain free as government weighs MDR on larger merchant transactions
Banks and payment providers cannot charge users for UPI payments up to ₹2,000 or RuPay debit-card transactions. The government may allow a nominal merchant discount rate on selected higher-value UPI payments, while consumer and peer-to-peer transfers remain free.
What happened
Government notified that banks and payment providers cannot charge for UPI transactions up to Rs 2,000 or RuPay debit-card payments. It may permit nominal
Key facts
- UPI transactions up to Rs 2,000 remain free of charges
- UPI processed 24.51 billion transactions worth Rs 29.82 trillion in August
- Google Pay and PhonePe accounted for around three-fourths of UPI transaction volume
Why this matters
Prioritize partnerships with banks, PSPs and enterprise merchants that can benefit from compliant higher-value UPI payment infrastructure and settlement services.
What to watch
- Finance Ministry, RBI or NPCI consultation paper specifying transaction threshold, merchant eligibility, MDR cap and effective date.
- Whether fees apply only to merchant-present payments, or also to online, QR, recurring, credit-on-UPI or specific sectors.
- Clarification on who bears the charge: merchant, acquirer, issuer, app provider or government subsidy mechanism.
- Changes in UPI transaction mix, especially growth in transactions above ₹2,000 and organised-retail share of those payments.
- Acquirer announcements on merchant pricing, gateway fees, settlement terms, fraud tooling and service tiers.
- Political or consumer backlash to any perceived reduction in free UPI access.
- Model payment-cost exposure by UPI ticket band, merchant category and store format rather than treating UPI as uniformly zero-cost.
- Prepare checkout and settlement systems to identify any transactions covered by a future MDR threshold and route payments according to cost, conversion and fraud performance.
- Renegotiate acquiring, gateway and reconciliation contracts to secure transparent MDR pass-through, service-level commitments and volume-based rebates.
- Avoid customer-facing UPI surcharges unless explicitly permitted; preserve free low-ticket checkout messaging to protect conversion and regulator relations.
- Evaluate whether high-value purchases can be incentivised toward lower-net-cost payment modes without degrading UPI acceptance or customer experience.