UPI Charges are under scrutiny after the Centre clarified that payments above Rs 2,000 could potentially attract charges under a new framework. However, the latest notification does not automatically impose any fee on users making UPI payments above Rs 2,000. Payments up to Rs 2,000 remain protected from charges, while any future fee structure will depend on subsequent decisions by the UPI and Services Steering Committee headed by NPCI.

Key Highlights

• UPI charges for payments above Rs 2,000 will not automatically attract a new consumer fee under the Centre’s latest notification.
• Payments up to Rs 2,000 remain protected, while future UPI charges could depend on NPCI-led decisions.

The government issued a notification under the Payment and Settlement Systems Act, 2007, specifying the electronic payment modes on which banks and payment system providers cannot levy charges. The notification states that no charge can be imposed directly or indirectly on a person making or receiving payments through the specified modes.

UPI Payments Up to Rs 2,000 Will Remain Free

The notification provides explicit protection for UPI transactions within Rs 2,000. Users making payments of Rs 500, Rs 1,500 or Rs 2,000 through UPI will not have to pay a transaction fee to banks or payment system providers under the specified framework.

RuPay debit card payments are also covered by the notification, ensuring that banks and payment system providers cannot impose charges on these transactions.

Will UPI Payments Above Rs 2,000 Attract Charges?

The notification does not mean that UPI payments above Rs 2,000 will automatically become chargeable.

A payment of Rs 2,500, Rs 5,000 or Rs Rs 20,000 does not attract a new consumer fee simply because it exceeds the Rs 2,000 threshold. Instead, the notification establishes a framework under which charges could potentially be introduced for certain transactions.

The final decision on whether charges will apply to transactions above Rs 2,000, as well as the applicable rates, will be taken by the UPI and Services Steering Committee headed by the National Payments Corporation of India (NPCI).

What Is MDR and How Does It Affect UPI?

Merchant Discount Rate, or MDR, is a fee associated with processing digital payments. It is generally paid by merchants to banks and payment service providers involved in processing a transaction.

Currently, merchants do not pay MDR for accepting UPI payments. This differs from certain other digital payment methods, including debit and credit cards, where merchants generally pay processing fees.

The government has previously indicated that any MDR on UPI could be restricted to selected merchant transactions above a specified threshold. It has also stated that such charges would be lower than those applicable to credit and debit card payments.

Will Customers Pay More If MDR Is Introduced?

Not necessarily. If MDR is introduced for certain UPI transactions, the charge would primarily apply to merchants or entities within the payment ecosystem processing the transaction.

Therefore, the introduction of MDR would not automatically mean that a customer making a Rs 5,000 UPI payment would have an additional amount deducted from their bank account.

The government has maintained that UPI payments for consumers will remain free, while the exact structure and scope of any future charges will depend on subsequent decisions by the relevant authorities.

Also Read: UPI Transaction Volume Hits Record 24.51 Billion in August: NPCI Data

What Does the New UPI Rule Mean for Users?

For ordinary UPI users, there is no immediate change in how payments work.

Users can continue making UPI payments of up to Rs 2,000 without transaction charges under the protection specified in the latest notification. Importantly, Rs 2,000 is not a new maximum limit for free UPI payments.

Payments above Rs 2,000 also do not automatically become chargeable. Any future charges would depend on decisions taken under the new framework, including which merchants or transactions are eventually covered.

For consumers, the immediate takeaway is that everyday UPI payments remain free, while the possibility of charges for certain higher-value merchant transactions remains subject to further decisions.