UPI payments up to Rs 2,000 to stays free, but bigger transactions may soon cost you: Govt

Indian government on Monday (September 14) notified changes in its payments legislation, specifying that banks cannot charge fees on payments ​via Unified Payments Interface (UPI) transactions of up to 2,000 ‌rupees ($20.93) and RuPay debit cards. The announcement of legislation changed the earlier provision preventing banks from charging fees on digital payments using the popular UPI platform, paving the way ​for charges to be imposed on larger transfers.

The government has issued the notification under Section 10A of the Payment and Settlement Systems Act, 2007. “In exercise of the powers conferred by Section 10A of the Payment and Settlement Systems Act, 2007 (51 of 2007), the Central Government hereby specifies the following electronic modes of payment, namely: (i) Debit Card powered by RuPay; and (ii) Unified Payments Interface (UPI) transactions up to Rs. 2,000,” the Ministry of Finance said.

“No bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment by using the electronic modes of payment specified in the paragraph above,” it added.

The notification ensures that UPI transactions up to Rs 2,000 continue to remain free of any charges, while opening the door for a possible small Merchant Discount Rate (MDR) to be levied on select UPI merchant transactions above a certain threshold. Meanwhile, reports suggest that merchant fees ​on larger ⁠UPI transactions could generate 50 billion rupees to 100 billion rupees annually for the payments ​industry.