The Ministry of Finance has clarified that UPI transactions will continue to remain free for all peer-to-peer transfers, addressing concerns about potential charges on digital payments. The ministry issued an official statement confirming that the new framework introduced for UPI has no impact on person-to-person transactions, ensuring that individual users can continue to send and receive money without any charges.
According to the official announcement, UPI will remain completely free for all person-to-person transactions, regardless of the amount being transferred. This means that individuals can continue to send money to friends, family members, or any other person through UPI-enabled applications without incurring any fees. The ministry emphasized that this policy remains unchanged under the new framework.
For merchant transactions, the government has provided significant relief to small businesses and consumers. Payments to merchants up to ₹2,000, along with transactions covered under the zero-MDR framework for small merchants, will also remain free of charge. This decision ensures that everyday purchases and small-value transactions continue without additional costs for both consumers and small business owners.
The ministry revealed that approximately 96% of all person-to-merchant transactions will remain unaffected by the new framework. The Merchant Discount Rate (MDR) will only apply to specified merchant transactions exceeding ₹2,000. This targeted approach ensures that the vast majority of digital payments in the country continue without any additional burden on users or small merchants.
The government clarified that MDR is neither a tax nor a charge collected by the government or NPCI (National Payments Corporation of India). Instead, it is distributed among payment ecosystem participants, including banks and payment application providers. This distribution mechanism is designed to support the operation and continued expansion of the UPI ecosystem, ensuring its sustainability and growth in the long term.
The framework was introduced under the Payment and Settlement Systems Act, 2007, following detailed deliberations by the UPI Steering Committee. The committee designed this framework to ensure the long-term sustainability of UPI while protecting individuals and small merchants from additional charges. The ministry stated that this balanced approach aims to maintain the growth of digital payments while ensuring the financial viability of the payment infrastructure.
