PIB TrackerUPI stays free for you — the question is who pays for it
The government moved to kill the narrative that the Payment and Settlement Systems Act amendment means charges on ordinary users: consumers and P2P transfers stay free, and any MDR would be threshold-based and fall only on larger merchants.
What happened
- The government stated categorically that consumers will face no transaction charges on UPI.
- All person-to-person transactions will continue to be free of charge.
- Any MDR would apply only to merchant transactions above a threshold, at a nominal rate.
- The 'UPI and Services Steering Committee' headed by NPCI would decide on any MDR.
- The Taxation and Other Laws (Amendment) Bill, 2026 amends Section 10A of the PSS Act, 2007.
For Prelims
- MDR: the Merchant Discount Rate — the fee a merchant pays on a digital transaction, split among the acquirer, issuer and network.
- PSS Act, 2007: the Payment and Settlement Systems Act; Section 10A is the provision being amended.
- Vehicle for the amendment: the Taxation and Other Laws (Amendment) Bill, 2026.
- Decision-maker: the 'UPI and Services Steering Committee' headed by NPCI.
- NPCI: the National Payments Corporation of India, the umbrella organisation for retail payments.
- Timeline: UPI launched in 2016; made free for merchants and citizens from January 2020.
- The stated rationale: cybersecurity and fraud-prevention upgrades, market competition, and self-sustainability beyond subsidies.
For UPSC: A live policy debate you can argue either way. Use it for the economics of zero-MDR and who bears the cost of a public digital good, financial inclusion versus platform sustainability, and DPI governance where a private umbrella body sets prices.
What it is NOT: No MDR has been imposed — this is an enabling amendment that has not yet passed Parliament, and any rate would still have to be decided separately by the NPCI-headed committee.
For Mains
Syllabus: GS3.1 · GS2.10 · Linkage L1
Anchor
Free is not costless — someone has always been paying for UPI, and the amendment is an argument about who should.
Substantiation (data)
UPI has been free for merchants and citizens since January 2020, and the government says subsidy alone cannot fund the next wave of growth into rural and semi-urban India.
Exemplification
Any MDR would be threshold-based and confined to larger merchant transactions, at a rate below card MDRs.
Problematisation
A threshold today can be lowered tomorrow, and the pricing decision sits with an NPCI-headed committee rather than with Parliament.
Way-forward
Legislate the consumer-free guarantee rather than assert it, and publish the cost structure that any MDR is meant to recover.
Position
Digital public infrastructure needs a funding model as durable as its architecture — but the model must be set transparently, not administratively.
Deploys into: Economy + government interventions (GS3.1, GS2.10) · zero-MDR economics, financial inclusion versus platform sustainability, and the governance of digital public infrastructure.
Ministry of Finance · 2026-08-08 · PRID 2296594 · PIB source ↗