Indian Finance Ministry: Future UPI charges to apply to select merchants, not consumers

India's Finance Ministry has issued a clarification regarding potential future transaction charges on the Unified Payments Interface (UPI) system. The ministry affirmed that consumers will not be required to pay fees for using UPI. Any future Merchant Discount Rate (MDR) would apply only to a select group of merchants exceeding a certain threshold and would be nominal in nature.

The clarification addresses concerns that arose following a new bill proposing to allow banks and payment companies to charge merchants for UPI transactions. While consumers would not directly pay, fears existed that merchants would pass on the costs. The ministry emphasized that if MDR is introduced, it would be significantly lower than the current rates for credit or debit cards, which can range from 1% to 3% of the transaction value.

All person-to-person (P2P) UPI transactions will continue to be free of charge. Future decisions on any potential MDR will be made only after the relevant bill passes through Parliament. Subsequently, the National Payments Corporation of India (NPCI) will decide on the specifics, including thresholds and rates, with reports suggesting a potential charge of 0.25-0.4% for large merchant UPI transactions.

The ministry stated that this change is necessary to ensure the long-term sustainability of the UPI ecosystem. Growing transaction volumes and the need to invest in cybersecurity, fraud prevention, and infrastructure require a self-sustaining revenue model. The government also denied reports of external influences dictating policy changes, labeling them as false and misleading.