UPI payments to remain free for consumers, small merchants: Payments Council of India

New Delhi: Consumers and small merchants are unlikely to be charged for Unified Payments Interface (UPI) transactions, even as Parliament moves to amend the law to allow charges on digital payments, the Payments Council of India (PCI) said on Friday.

The statement came a day after the Lok Sabha passed a Bill to amend the Payment and Settlement Systems Act, 2007. The proposed changes empower the government to notify electronic payment modes and transactions that can attract charges.

UPI has remained free for consumers since its launch in 2016 and users will continue to be able to make instant digital payments without transaction charges, the PCI said in a post on X.

The industry body also clarified that small merchants, including kirana stores, would continue to accept UPI payments without paying the Merchant Discount Rate (MDR).

The current debate, it said, is about creating a sustainable financial model for maintaining and expanding the infrastructure supporting UPI, now the world's largest real-time payments system, while protecting consumers and small businesses.

Finance Minister Nirmala Sitharaman said on Thursday that MDR, if introduced, would apply to merchants and not customers. Such revenue would help banks and fintech companies invest in payment infrastructure and security, she said.

Responding to Congress leader Jairam Ramesh's claim that ordinary users could end up paying more for UPI, Sitharaman said the UPI and Services Steering Committee headed by the National Payments Corporation of India (NPCI) was yet to decide on the MDR. She said any such decision would come only after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026.

Under the proposed changes, the Centre would have the power to specify through a notification which electronic payment modes or transactions would remain free.

The PCI said banks, payment companies, fintech firms, NPCI and the Reserve Bank of India (RBI) have invested in technology, cybersecurity, fraud prevention, innovation and customer support over nearly a decade to build and maintain the UPI ecosystem.

Maintaining a nationwide digital payments infrastructure involves continuous expenditure on technology, cybersecurity, compliance, fraud prevention and customer support, with these costs currently being borne by banks and payment service providers, it said.

The PCI added that even if merchant service charges are imposed on large merchants in the future, consumers would not be required to pay for using UPI.

"Merchant service charges, wherever applicable, are commercial arrangements between merchants and payment service providers and do not translate into charges for consumers," the association said, noting that similar arrangements exist across digital payment systems globally.

The industry body stressed that UPI has become critical national digital infrastructure used by hundreds of millions of Indians every day, making continued investment in security, resilience, innovation and fraud prevention essential for its growth.