Consumers and small merchants, including neighbourhood kirana stores (small shopkeepers), will continue to be able to use and accept Unified Payments Interface (UPI) payments without transaction charges, the Payments Council of India (PCI) said on Friday, seeking to clarify concerns over the possibility of charges on digital payments. Formed by IAMAI (Internet and Mobile Association of India) in 2013, PCI caters to the needs of the digital payments industry in India.
The clarification comes after the Lok Sabha passed a Bill to amend the Payment and Settlement Systems Act, 2007, enabling the government to permit banks and other service providers to levy charges on payments made through UPI and other notified electronic payment modes.
“UPI has always been free for consumers since its launch in 2016. Every Indian can continue making instant digital payments without paying any transaction charges,” PCI said in a post on X.
Importantly for millions of small businesses that rely on UPI, the industry body said kirana stores and other small merchants would also continue to accept UPI payments without paying a Merchant Discount Rate (MDR).
Why are UPI charges being discussed?
The debate centres on how to fund the rapidly expanding infrastructure supporting UPI while keeping the payment system free for consumers and small businesses.
UPI has grown into the world’s largest real-time payment system, requiring banks, fintech companies and payment service providers to continuously spend on technology, cybersecurity, fraud prevention, compliance and customer support.
Finance Minister Nirmala Sitharaman on Thursday said MDR on digital transactions applies to merchants and not customers, and argued that such charges would help banks and fintech companies invest further in infrastructure and security.
Responding to Congress leader Jairam Ramesh’s claim that ordinary people could end up paying more for using UPI, Sitharaman said the UPI and Services Steering Committee headed by the National Payments Corporation of India (NPCI) was yet to decide on MDR.
A decision would come only after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, she said.
Under the proposed framework, the Centre would be able to specify through notification which electronic payment modes or categories of transactions would remain free.
Could large merchants be charged?
While PCI has ruled out charges for consumers and small merchants, its statement leaves open the possibility of merchant service charges being imposed on larger businesses in the future.
Even in such a scenario, consumers would not have to pay for making UPI transactions, it said.
“Merchant service charges, where applicable, are commercial arrangements between merchants and payment service providers. They do not mean that consumers pay to use digital payments,” PCI said.
Such merchant charges are common across digital payment systems globally, it added.
Who currently bears the cost of UPI?
At present, the costs of operating the UPI ecosystem are largely borne by banks and payment service providers.
PCI said banks, payment companies, fintech firms, NPCI and the Reserve Bank of India have collectively invested for nearly a decade in technology, cybersecurity, fraud prevention, innovation and customer support to build and maintain the UPI network.
Running a nationwide digital payments infrastructure requires continuous expenditure on technology, compliance, security and fraud prevention, even though consumers and small merchants do not directly pay transaction fees.
With UPI now used by hundreds of millions of Indians, PCI said finding a sustainable way to fund the ecosystem would be important to maintain its security and resilience as transaction volumes continue to increase.