Is UPI Still Free? What Happens When You Send More Than Rs 2,000? Check New Rules And Charges

Banks and payment system providers have been barred from imposing charges on Unified Payments Interface (UPI) transactions up to Rs 2,000 or on payments made through RuPay debit cards, the Ministry of Finance announced in a gazette notification on Monday. According to the ministry, no individual can be charged directly or indirectly for making or receiving payments via online modes.

The announcement follows an amendment to the Payment and Settlement Systems (PSS) Act, 2007. The amendment establishes an enabling framework for imposing a Merchant Discount Rate (MDR) on select digital payments.

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What Does the New Rule Imply?

The new rule ensures that transactions up to Rs 2,000 remain free of cost while protecting RuPay debit card payments from similar fees. Even as an MDR has not yet been implemented, charges on UPI transactions exceeding Rs 2,000 could still be introduced in the future.

In August, the government indicated the possibility of introducing a nominal Merchant Discount Rate (MDR) on a limited set of larger UPI merchant transactions. Officials clarified that any such fee would be borne by merchants rather than consumers, while person-to-person payments would remain free.

MDR, usually ranging between 1 and 3 per cent for card transactions, is paid by merchants to banks and payment processors to cover transaction processing, settlement and infrastructure costs. The government described the proposed changes as part of efforts to ensure the financial sustainability of India’s digital payment ecosystem as adoption continues to expand.

Finance ministry data shows that only around 4 per cent of person-to-merchant (P2M) transactions by volume were above Rs 2,000 in FY26. About 20 per cent of person-to-person transactions crossed the threshold, indicating that a large majority of digital payments would continue to remain outside any eventual levy.

Banks and payment gateways have consistently highlighted the rising operational costs of maintaining UPI infrastructure. A Parliamentary Standing Committee on Finance report in March similarly raised concerns regarding ecosystem sustainability in the absence of MDR. Introducing fee structures on larger commercial transactions could create a new revenue pool estimated by Jefferies at Rs 5,000 crore to Rs10,000 crore annually. While small transactions remain protected, monetization at the top may finally solve UPI’s long-standing infrastructure funding challenge.

Payments By UPI Record High

UPI, operated by the National Payments Corporation of India (NPCI), has emerged as the world’s largest retail fast-payment system by transaction volume, according to a 2025 International Monetary Fund report.

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In August, UPI processed 24.51 billion transactions worth Rs 29.82 trillion, with Google Pay and Walmart-owned PhonePe accounting for roughly three-fourths of the total transaction volume.

The possibility of charges on larger merchant transactions could create a new revenue stream for banks and payment firms. Jefferies estimated in August that such fees could generate Rs 5,000 crore to Rs 10,000 crore annually for the payments industry.