3 weeks ago
UPI Stays Free For Consumers And Small Merchants, PCI Says
UPI is a way for people in India to send and receive money using their phones.
The Payments Council of India said that using UPI will always be free for people.
Small shops, like kirana stores, also don't have to pay any fees to accept UPI payments.
UPI has been free for everyone since it started in 2016.
Some people were worried that new laws might make payments cost more.
The government said any fees would apply only to big shops, never to customers.
The new law does not add charges right away; it just lets the government decide about charges in the future.
Merchant fees are money that shops pay to banks, not money that customers pay.
Banks and payment companies keep investing to make UPI safe and fast.
UPI is now the biggest real-time payment system in the world, so you can keep paying with your phone without worrying about extra charges.
The Payments Council of India (PCI) clarified on August 7, 2026, that UPI will remain free for consumers, with no transaction charges proposed.
Small merchants, including kirana stores, will not be required to pay Merchant Discount Rate (MDR) charges for accepting UPI payments.
UPI has been free for consumers since its launch in 2016, according to PCI.
The clarification came a day after the Lok Sabha passed the Payment and Settlement Systems (Amendment) Bill, 2026, which removes the legal prohibition on levying MDR on notified payment modes but does not immediately impose charges.
PCI said UPI has become the world's largest real-time payment system, processing billions of transactions every month, requiring ongoing investment from banks, NPCI, fintechs and the RBI.
- Who
- The Payments Council of India (PCI), an industry body representing the payments sector, issued the clarification; Finance Minister Nirmala Sitharaman, Congress leader Jairam Ramesh and RBI Governor Sanjay Malhotra also commented on the issue.
- What
- PCI clarified that UPI will remain free for consumers and that small merchants, including kirana stores, will not be charged Merchant Discount Rate (MDR), even as the amended law empowers the central government to decide which payment modes may attract charges in the future.
- Where
- India; the announcement was made from New Delhi via PCI's post on social media platform X.
- When
- Friday, August 7, 2026, a day after the Lok Sabha passed the Payment and Settlement Systems (Amendment) Bill, 2026.
- Why
- To address debates over the sustainability of India's digital payments infrastructure, now the world's largest real-time payment system, while ensuring consumers and small businesses remain protected.
Critics' View
Government and PCI View
Will ordinary UPI users pay more?
Critics' View
Congress leader Jairam Ramesh remarked that ordinary people may have to pay more for using UPI.
Government and PCI View
Finance Minister Nirmala Sitharaman said MDR applies to merchants, not customers, and PCI said consumers will never pay UPI transaction charges.
Merchant charges to fund UPI infrastructure
Critics' View
Ashneer Grover called MDR on UPI 'a regressive step' that would kill mobile payments; critics say MDR could discourage small merchants or eventually increase costs for consumers.
Government and PCI View
PCI says merchant service charges are commercial arrangements between merchants and payment providers, small merchants are exempt, and charges would help banks and fintechs invest in infrastructure, cybersecurity and innovation.
How should UPI infrastructure be funded?
Critics' View
RBI Governor Sanjay Malhotra observed that digital payment infrastructure could be funded through a 'user pays' model.
Government and PCI View
The alternative is continued public funding through taxpayers, as the government has not yet notified whether, when or on which transactions any charges may apply.
Key facts
- Announcement
- UPI remains free for consumers; small merchants won't pay MDR
- Issuing body
- Payments Council of India (PCI)
- Date
- August 7, 2026
- Free since
- 2016
- Consumer transaction charges
- None proposed
- Small merchant MDR
- No charges
- Related law
- Payment and Settlement Systems (Amendment) Bill, 2026 passed by Lok Sabha
- System status
- World's largest real-time payment system, billions of transactions monthly
Quotes
Finance Minister Nirmala Sitharaman
Indian Finance Minister
“"It is premature to discuss the levy of MDR but observed that digital payment infrastructure must ultimately be funded either through a 'user pays' model or continued public funding through taxpayers."”
businesstoday.in
“The Merchant Discount Rate on digital transactions applies to merchants and not to customers, and the MDR charge would support banks and fintech to invest more in infrastructure and security.”
NDTV
Sources
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