Government keeps UPI and RuPay debit card payments up to ₹2,000 free; certain higher-value merchant transactions may attract charges
New Delhi: The government has cleared the way for UPI payments of up to ₹2,000 to remain free, while certain UPI transactions above this threshold may be subject to charges in the future.
Under a notification issued on Monday under the Payment and Settlement Systems Act, 2007, banks and payment system operators will not be allowed to directly or indirectly levy charges on the payer or recipient for UPI and RuPay debit card transactions up to ₹2,000.
No charges on UPI payments up to ₹2,000
The notification provides that UPI transactions up to ₹2,000 will remain free of charges. The same provision applies to payments of up to ₹2,000 made through RuPay debit cards.
This means banks and payment system operators cannot directly or indirectly recover a fee from customers or recipients for making or receiving payments through these digital payment channels within the specified limit.
What happens to payments above ₹2,000?
The notification opens the possibility of charging fees on UPI transactions above ₹2,000, but it does not mean that every UPI payment exceeding ₹2,000 will immediately become chargeable.
The exact transactions that could attract a fee, the applicable threshold and the amount of the charge have not yet been finalised.
These details are expected to be decided by the UPI and Service Operations Committee, led by the National Payments Corporation of India (NPCI).
Therefore, users should not assume that a charge will automatically be deducted whenever they make a UPI payment above ₹2,000.
Will ordinary UPI users have to pay more?
For everyday users making smaller payments, there is no immediate change. UPI transactions up to ₹2,000 will continue to remain free under the notified framework.
The potential charges are primarily expected to concern specified higher-value merchant transactions, depending on the framework eventually approved by the relevant committee.
What is MDR?
Merchant Discount Rate (MDR) is the fee associated with accepting digital payments, generally paid by merchants to banks, payment networks or payment service providers.
At present, merchants do not pay MDR for accepting UPI payments. By contrast, merchants may have to pay charges when accepting payments through credit cards and certain other payment methods.
The government has previously indicated that if MDR is introduced for UPI, it could be restricted to selected merchant transactions above a prescribed value, with rates potentially kept lower than those applicable to credit and debit card payments.
What will be decided next?
The UPI and Service Operations Committee will determine the details of any potential charging mechanism, including:
- Which merchant transactions will attract MDR.
- The minimum transaction value for applying the charge.
- The MDR rate.
- How the applicable fee will be structured among the different participants in the payment ecosystem.
For now, the key takeaway is that UPI payments up to ₹2,000 remain free, while the government notification creates a framework under which charges may potentially be introduced for certain higher-value merchant transactions.
