Payments Council Rules Out Consumer MDR on UPI; Transactions to Remain Free

The Payments Council of India (PCI) has confirmed that UPI payments will continue to be free for consumers, addressing speculation about the potential reintroduction of Merchant Discount Rate (MDR) on certain UPI transactions. The industry body stated on X that small merchants, including local vendors, will also remain protected from MDR charges.

This clarification follows the parliamentary passage of the Taxation and Other Laws (Amendment) Bill, 2026, which includes provisions to amend the Payment and Settlement Systems Act, 2007. This amendment empowers the government to prescribe MDR for specific electronic payment transactions.

While the final framework is pending, the government is anticipated to levy an MDR of 0.25% to 0.4% on business UPI transactions exceeding ₹2,000. Person-to-person (P2P) UPI payments are expected to remain exempt from these charges.

The PCI emphasized that any applicable merchant service charges would remain commercial agreements between merchants and payment service providers, and would not be passed on to consumers. Major payment platforms like PhonePe and Razorpay have reiterated their commitment to keeping UPI free for consumers and small businesses.