UPI stays free: Finance Ministry bars charges on transactions up to Rs 2,000

The Finance Ministry on Monday notified that UPI transactions of up to Rs 2,000 and payments made using RuPay debit cards will not attract any charges.

In a notification dated September 14, the Ministry of Finance's Department of Financial Services said the Centre was exercising powers under Section 10A of the Payment and Settlement Systems Act, 2007 to specify the electronic modes of payment that would attract no charge.

The notification covers RuPay-powered debit cards and UPI transactions up to Rs 2,000.

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The notification states that no bank or system provider can directly or indirectly impose any charge on a person making or receiving a payment through these specified modes. The move effectively provides statutory protection against charges for UPI transactions within the Rs 2,000 threshold.

"No bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment by using the electronic modes of payment specified in paragraph above," the notification said.

The development comes a little over a month after Finance Minister Nirmala Sitharaman sought to allay concerns over the possible return of Merchant Discount Rate, or MDR, on UPI payments.

The debate followed changes to Section 10A of the Payment and Settlement Systems Act, which removed the blanket statutory zero MDR provision and gave the government the power to specify payment modes or transactions that would remain free.

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Responding to Congress leader Jairam Ramesh on August 6, Sitharaman had said, "Merchant Discount Rate (MDR) applies only on the merchants and not on the end users/customers. It will support the Banks & Fintech to invest more on infrastructure, innovation & security. All users of UPI will reap the benefits of this investment."

Sitharaman had also said at the time that the UPI and Services Steering Committee headed by the National Payments Corporation of India had yet to decide on the MDR framework. Her response came after Ramesh claimed the government was paving the way for MDR to be imposed on UPI transactions and argued that the cost could ultimately be passed on to consumers.