Finance Minister Nirmala Sitharaman said UPI transactions will remain free for consumers and small merchants in India [1, 2].
This clarification addresses growing public and political anxiety regarding the potential introduction of fees on the Unified Payments Interface. Because UPI is a cornerstone of India's digital economy, any perceived shift toward charging users could impact the adoption of cashless payments among lower-income populations.
Sitharaman said that any merchant discount rate, known as MDR, would be limited to select larger transactions that exceed a specific threshold [1, 2]. The government intends to maintain the accessibility of the system for the general public while managing the costs associated with larger commercial entities.
To support the UPI ecosystem, the government highlighted the role of the central bank. The Reserve Bank of India's surplus transfer for FY 2025-26 is ₹2.86 lakh crore [3]. This financial backing is intended to ensure the infrastructure remains sustainable without placing a financial burden on the end user.
While some reports suggested a nominal MDR could eventually lead to consumer charges, the finance minister's statement separates the consumer experience from the merchant's obligations [1, 2]. The current policy framework prioritizes the removal of barriers for small-scale vendors, and individual users.
By limiting charges to high-value transactions, the government aims to balance the need for payment processor viability with the goal of financial inclusion. This approach prevents the digital payment system from becoming a regressive cost for the poor while ensuring larger businesses contribute to the maintenance of the network [1, 2].
“UPI transactions will remain free for consumers and small merchants”
The Indian government is attempting to protect the 'zero-fee' psychology that drove UPI's rapid growth. By shielding consumers and small vendors from MDR charges, the state ensures that digital payments do not replace cash as a luxury, while using central bank surpluses to subsidize the technical infrastructure of the network.
