UPI Payment Charge: No fee applies to payments of ₹2,001; understand the real meaning of the ₹2,000 limit..

UPI Payment Charges: The government has clarified that UPI transactions up to ₹2,000 will remain free. Banks and payment system providers cannot levy any direct or hidden charges on these. However, this does not mean that a customer will be charged a fee simply for making a UPI payment of ₹2,001.

What happens with payments exceeding ₹2,000?

A Ministry of Finance notification dated September 14 exempts UPI transactions up to ₹2,000 from charges under Section 10A of the Payment and Settlement Systems Act. Crucially, customers will not be charged any extra money even for UPI payments exceeding ₹2,000.

If the MDR (Merchant Discount Rate) is applied to large merchant payments in the future, the merchant—not the customer—will have to bear this charge. For instance, if you purchase goods worth ₹5,000 at a shop, you will only pay ₹5,000. If an MDR of 0.4% is implemented later and the payment falls within its scope, the merchant will have to absorb the ₹20 processing cost.

What happens when sending ₹20,000 to a friend?

No MDR will apply when sending ₹5,000 or ₹20,000 to a friend or relative via UPI. The government has stated that P2P (person-to-person) UPI transactions will remain free. Therefore, the ₹2,000 limit does not imply that a charge will be levied for sending ₹2,001 to an individual.

The actual discussion revolves around P2M (person-to-merchant) payments—that is, when you make a payment via UPI to a shop, company, or other merchant.

What if a UPI payment of ₹5,000 is made at a shop?

No new charges have been implemented yet. Merchant payments exceeding ₹2,000 could potentially fall under the MDR ambit in the future, but the rate has not been determined yet. It is also unclear which merchants this will apply to and when it will come into effect.

MDR is a type of payment processing fee. Typically, it is borne by the merchant accepting the payment; the fee is not charged to the customer.

Where did the figure of 0.4% MDR come from?

On September 15, the news agency Reuters reported, citing sources, that regulators are moving towards a 0.4% charge. However, a final decision has not yet been reached. It is also undecided how this fee will be shared among banks, payment apps, and payment service providers.

If a 0.4% MDR is applied to the entire transaction amount in the future, the calculation will vary depending on the payment value. For instance, a 0.4% charge on a ₹5,000 payment amounts to ₹20. However, it has not yet been determined whether the MDR will apply to the total payment amount or only to the portion exceeding ₹2,000.

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