UPI Free or Not: Will there be charges on UPI transactions? RBI Governor's statement clears up all confusion..

In India today, the use of UPI has become commonplace for everything from paying for morning tea to settling grocery bills. Consequently, news regarding potential charges on UPI transactions raises concerns for the average person. A recent bill introduced in Parliament has reignited the debate over whether digital payments will soon become an added expense for consumers. Reserve Bank of India (RBI) Governor Sanjay Malhotra sought to clarify the situation with a significant statement on August 5.

**Will it impact your wallet?**
The primary question is whether ordinary customers will have to pay to use UPI. For now, the answer is ‘no.’ No new charges have been implemented for customers, merchants, or any type of UPI transaction so far. Speaking at a press conference following the monetary policy announcement, RBI Governor Sanjay Malhotra clarified that it is premature to decide who would bear the financial burden if a Merchant Discount Rate (MDR) were to be introduced. He emphasized that operating payment networks involves costs that must be covered by someone. Often, customers indirectly bear the cost of this infrastructure in one way or another, even if they do not pay a direct transaction fee.

**What is the new formula for the ₹2,000 limit?**
Media reports and official sources indicate that the government is considering imposing an MDR of less than 0.5 percent on commercial UPI payments (payments made to merchants) exceeding ₹2,000. A point of relief is that person-to-person (P2P) transfers will remain entirely exempt from this proposed framework. Data shows that while transactions above ₹2,000 account for only 5 percent of the total volume of UPI payments, they represent approximately 65 percent of the total value. The implementation of this rule will not affect small-value payments. However, the bill does not yet specify any fixed rates or a ₹2,000 limit.

**How ​​the new bill will alter digital payment rules**
Finance Minister Nirmala Sitharaman introduced the ‘Taxation and Other Laws (Amendment) Bill, 2026’ on August 4. This new bill will bring about a significant change to Section 10A of the Payment and Settlement Systems Act, 2007. This effectively means the Central Government will now have the authority to determine which electronic payment modes remain completely free and which ones may attract charges. Until this bill becomes law and new guidelines are issued, the ‘Zero-MDR’ rule—in effect since January 2020—will continue to apply to UPI and RuPay debit cards.

**Why there is a demand to levy charges**
The government had previously waived charges on UPI to boost digital payments. However, the banks and payment companies operating the system have long been calling for a revenue model. They argue that they incur substantial costs in managing technology, cybersecurity, and network infrastructure. A report by the Parliamentary Standing Committee in March 2026 also acknowledged that government incentives are insufficient to cover the industry's expenses. In July alone, UPI facilitated 23.66 billion transactions worth ₹29.88 lakh crore. A sustainable financial framework is now being sought to ensure the secure and smooth operation of such a vast network.

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