The Indian government on Saturday (August 08) clarified that users will not have to pay transaction charges for making payments through the Unified Payments Interface (UPI). However, it opened the possibility of introducing a nominal Merchant Discount Rate (MDR) on a limited set of UPI merchant transactions above a specified threshold.&nbsp;The Finance Ministry said any future MDR on UPI would not apply to all merchant transactions. It also said the rate would remain substantially lower than the charges applicable to debit and credit card payments.&nbsp;"As and when MDR charges are introduced, they will apply only to a limited set of merchant transactions, above a certain threshold, at a nominal rate, far lower than debit or credit card MDRs," the Finance Ministry said in a release.&nbsp;The ministry added that the "vast majority" of UPI transactions would continue to remain free for merchants. Any MDR, if introduced, would depend on a threshold and would not become a blanket charge.&nbsp;Also Read: <a href="https://www.wionews.com/world/explained-why-ukraine-is-targeting-wildberries-warehouses-across-russia-in-its-drone-campaign-1786196632826">Explained: Why Ukraine is targeting Wildberries warehouses across Russia in its drone campaign</a><h2>UPI users and person-to-person payments to remain free</h2>The clarification came in connection with the Taxation and Other Laws (Amendment) Bill, 2026. The Bill proposes changes to Section 10A of the Payment and Settlement Systems Act, 2007.&nbsp;If Parliament passes the Bill, the "UPI and Services Steering Committee", headed by the National Payments Corporation of India (NPCI), will decide whether to introduce MDR and determine its framework, according to the ministry.&nbsp;The government stressed that the proposed amendment only creates an enabling provision and does not mean that charges will be imposed on ordinary UPI users.&nbsp;"UPI will remain free for citizens," the Ministry said, adding that all person-to-person transactions will also continue to remain free.&nbsp;The government said the rapid growth in UPI transactions requires continuous investment in cybersecurity, fraud prevention and payment infrastructure.<h2>Govt cites need for sustainable UPI ecosystem</h2>The Finance Ministry also said the digital payments ecosystem needs a sustainable revenue framework to encourage more companies to expand their operations.&nbsp;"Reliance on subsidies alone is not viable for the next wave of growth. A balanced framework is required to ensure that UPI remains robust, inclusive, and future-ready," the Ministry said.&nbsp;The government said the proposed amendment forms part of its broader effort to make India's digital payment infrastructure sustainable and competitive. It also aims to ensure that the system can support the country's expanding digital economy.&nbsp;The ministry rejected reports claiming that external influences had prompted the proposed policy changes. It described such claims as "unfounded, completely false and misleading."&nbsp;According to ministry data, UPI has become the world's largest real-time payment system. It processed 2,366 crore transactions worth ₹29.9 lakh crore in July 2026 alone. UPI is currently live in 11 foreign countries, while several other countries have also shown interest in the digital payment system.

The government clarified that UPI will remain free for users, while a nominal, threshold-based MDR could apply to a limited set of merchant transactions in the future.

The Indian government on Saturday (August 08) clarified that users will not have to pay transaction charges for making payments through the Unified Payments Interface (UPI). However, it opened the possibility of introducing a nominal Merchant Discount Rate (MDR) on a limited set of UPI merchant transactions above a specified threshold. The Finance Ministry said any future MDR on UPI would not apply to all merchant transactions. It also said the rate would remain substantially lower than the charges applicable to debit and credit card payments. "As and when MDR charges are introduced, they will apply only to a limited set of merchant transactions, above a certain threshold, at a nominal rate, far lower than debit or credit card MDRs," the Finance Ministry said in a release. The ministry added that the "vast majority" of UPI transactions would continue to remain free for merchants. Any MDR, if introduced, would depend on a threshold and would not become a blanket charge. Also Read: Explained: Why Ukraine is targeting Wildberries warehouses across Russia in its drone campaign UPI users and person-to-person payments to remain free The clarification came in connection with the Taxation and Other Laws (Amendment) Bill, 2026. The Bill proposes changes to Section 10A of the Payment and Settlement Systems Act, 2007. If Parliament passes the Bill, the "UPI and Services Steering Committee", headed by the National Payments Corporation of India (NPCI), will decide whether to introduce MDR and determine its framework, according to the ministry. The government stressed that the proposed amendment only creates an enabling provision and does not mean that charges will be imposed on ordinary UPI users. "UPI will remain free for citizens," the Ministry said, adding that all person-to-person transactions will also continue to remain free. The government said the rapid growth in UPI transactions requires continuous investment in cybersecurity, fraud prevention and payment infrastructure. Govt cites need for sustainable UPI ecosystem The Finance Ministry also said the digital payments ecosystem needs a sustainable revenue framework to encourage more companies to expand their operations. "Reliance on subsidies alone is not viable for the next wave of growth. A balanced framework is required to ensure that UPI remains robust, inclusive, and future-ready," the Ministry said. The government said the proposed amendment forms part of its broader effort to make India's digital payment infrastructure sustainable and competitive. It also aims to ensure that the system can support the country's expanding digital economy. The ministry rejected reports claiming that external influences had prompted the proposed policy changes. It described such claims as "unfounded, completely false and misleading." According to ministry data, UPI has become the world's largest real-time payment system. It processed 2,366 crore transactions worth ₹29.9 lakh crore in July 2026 alone. UPI is currently live in 11 foreign countries, while several other countries have also shown interest in the digital payment system.

The government clarified that UPI will remain free for users, while a nominal, threshold-based MDR could apply to a limited set of merchant transactions in the future.

No UPI fee for users, select merchant transactions may face charges: Govt

National Payments Corporation of India (NPCI) is working with banks and UPI apps to mask users' mobile numbers on the platforms to strengthen privacy as part of a broader effort to make digital payments more secure as UPI transactions continue to grow rapidly in India. Payment apps have reportedly been instructed to make these changes by September 4, 2026. To make this platform stronger and more secure, biometric authentication is likely to play a major role as UPI transactions have crossed 600 million by June 2026, according to the NPCI. NPCI stated that the technology-based on-device biometric authentication allows users to authorise payments using a smartphone's fingerprint or facial recognition. This feature enables both person-to-person (P2P) and person-to-merchant (P2M) transactions, making the RuPay Credit Card on UPI and allowing users to make PIN-free credit payments. The proposal came in light of rising text message-based scams in India, which have surged 146 per cent. It has highlighted a sharp shift in the digital fraud landscape of the country towards scam-led attacks, according to the latest Digital Banking Fraud Trends in India 2026 report by fraud detection firm BioCatch. The report indicated that the rapid expansion of the Unified Payments Interface (UPI), e-commerce, online investment platforms and mobile banking has made the fraud ecosystem of India increasingly digital, high-volume and driven by scams. The report found that although attempted fraud sessions among BioCatch's Indian customers dropped 12 per cent, the total value of attempted fraudulent payments rose 35 per cent, suggesting fraudsters are increasingly focusing on higher-value transactions.&nbsp;Also read: <a href="https://www.wionews.com/india-news/parliament-clears-vande-mataram-bill-makes-insult-to-national-song-a-criminal-offence-1785408853799">Parliament clears Vande Mataram Bill, makes insult to National Song a criminal offence</a><h3>How do UPI platforms balance user privacy with fraud detection?</h3>The NPCI has asked the platforms to display only the last four digits and to default to username-based IDs; experts have outlined a broader framework to ensure privacy gains don't come at the cost of security or accountability. To balance user privacy, traceability sits at the core of this approach, as in this case, mobile numbers would be hidden on public-facing UPI interfaces, and banks, NPCI, and authorised Payment Service Providers (PSPs) would retain secure backend access for essential functions like KYC verification, dispute resolution, and fraud investigations. This mirrors NPCI's own stated rationale; the directive follows a circular responding to widespread social media complaints, particularly from women, about safety and identity-theft risks tied to visible phone numbers during transactions. Lawful access would remain strictly regulated, with personal details shared with law enforcement only through formal legal channels such as court orders or statutory requests, preventing misuse while preserving investigative capability. To offset reduced visibility of phone numbers, experts recommend AI-driven fraud detection powered by behavioural analytics, device fingerprinting, transaction pattern analysis, and risk scoring. This aligns with industry trends, including a recent BioCatch report which found SMS scams in India surged 146 per cent and mobile fraud sessions rose 67 per cent between H2 2025 and H1 2026, with fraud increasingly shifting toward high-value transactions even as overall attempted fraud sessions declined 12 per cent, suggesting financial institutions are already strengthening detection capabilities. Data minimisation and audit trails would ensure only essential information, such as a verified name or a masked number, is displayed, while encrypted logs are maintained in the backend to support regulatory compliance and investigations when needed. Ultimately, the goal is a balanced approach, maximising user privacy without compromising payment security, financial system integrity, or authorities' ability to probe cybercrime, a principle that has become increasingly urgent given India's massive UPI footprint, which crossed 55 crore users as of June 2026, according to government data.&nbsp;

NPCI said on-device biometric authentication lets users authorise payments via fingerprint or facial recognition, enabling P2P and P2M transactions and allowing PIN-free credit payments through RuPay Credit Card on UPI.

National Payments Corporation of India (NPCI) is working with banks and UPI apps to mask users' mobile numbers on the platforms to strengthen privacy as part of a broader effort to make digital payments more secure as UPI transactions continue to grow rapidly in India. Payment apps have reportedly been instructed to make these changes by September 4, 2026. To make this platform stronger and more secure, biometric authentication is likely to play a major role as UPI transactions have crossed 600 million by June 2026, according to the NPCI. NPCI stated that the technology-based on-device biometric authentication allows users to authorise payments using a smartphone's fingerprint or facial recognition. This feature enables both person-to-person (P2P) and person-to-merchant (P2M) transactions, making the RuPay Credit Card on UPI and allowing users to make PIN-free credit payments. The proposal came in light of rising text message-based scams in India, which have surged 146 per cent. It has highlighted a sharp shift in the digital fraud landscape of the country towards scam-led attacks, according to the latest Digital Banking Fraud Trends in India 2026 report by fraud detection firm BioCatch. The report indicated that the rapid expansion of the Unified Payments Interface (UPI), e-commerce, online investment platforms and mobile banking has made the fraud ecosystem of India increasingly digital, high-volume and driven by scams. The report found that although attempted fraud sessions among BioCatch's Indian customers dropped 12 per cent, the total value of attempted fraudulent payments rose 35 per cent, suggesting fraudsters are increasingly focusing on higher-value transactions. Also read: Parliament clears Vande Mataram Bill, makes insult to National Song a criminal offence How do UPI platforms balance user privacy with fraud detection? The NPCI has asked the platforms to display only the last four digits and to default to username-based IDs; experts have outlined a broader framework to ensure privacy gains don't come at the cost of security or accountability. To balance user privacy, traceability sits at the core of this approach, as in this case, mobile numbers would be hidden on public-facing UPI interfaces, and banks, NPCI, and authorised Payment Service Providers (PSPs) would retain secure backend access for essential functions like KYC verification, dispute resolution, and fraud investigations. This mirrors NPCI's own stated rationale; the directive follows a circular responding to widespread social media complaints, particularly from women, about safety and identity-theft risks tied to visible phone numbers during transactions. Lawful access would remain strictly regulated, with personal details shared with law enforcement only through formal legal channels such as court orders or statutory requests, preventing misuse while preserving investigative capability. To offset reduced visibility of phone numbers, experts recommend AI-driven fraud detection powered by behavioural analytics, device fingerprinting, transaction pattern analysis, and risk scoring. This aligns with industry trends, including a recent BioCatch report which found SMS scams in India surged 146 per cent and mobile fraud sessions rose 67 per cent between H2 2025 and H1 2026, with fraud increasingly shifting toward high-value transactions even as overall attempted fraud sessions declined 12 per cent, suggesting financial institutions are already strengthening detection capabilities. Data minimisation and audit trails would ensure only essential information, such as a verified name or a masked number, is displayed, while encrypted logs are maintained in the backend to support regulatory compliance and investigations when needed. Ultimately, the goal is a balanced approach, maximising user privacy without compromising payment security, financial system integrity, or authorities' ability to probe cybercrime, a principle that has become increasingly urgent given India's massive UPI footprint, which crossed 55 crore users as of June 2026, according to government data.

NPCI said on-device biometric authentication lets users authorise payments via fingerprint or facial recognition, enabling P2P and P2M transactions and allowing PIN-free credit payments through RuPay Credit Card on UPI.

How should UPI platforms balance privacy, fraud detection and law enforcement access? EXPLAINED

upi-apps

Upi Apps, News on Upi Apps, stories on Upi Apps, articles on Upi Apps, Upi Apps stories at Wion, Upi Apps news, Upi Apps latest news

upi apps

No UPI fee for users, select merchant transactions may face charges: Govt

How should UPI apps balance privacy, fraud detection & law enforcement access?