New Delhi: The government made it clear on Saturday that users will not have to pay any transaction charge for making payments through the Unified Payments Interface (UPI).
According to the Ministry of Finance, person-to-person (P2P) UPI transactions will continue to remain completely free.
The majority of merchant transactions will also remain free of charge, but a nominal Merchant Discount Rate (MDR) could be introduced for a limited set of merchant transactions in future.
The Lok Sabha on Friday passed a Bill to amend the Payment and Settlement Systems Act, 2007, which authorises the government to permit banks and other service providers to levy charges on payments through UPI and other notified electronic payment modes.
If and when MDR charges are introduced, these will be applicable to a limited set of merchant transactions above a certain threshold, the government clarified. Such charges will be nominal and significantly lower than the MDR applicable to debit or credit card transactions.
The amendment in Payment and Settlement Systems Act, 2007, is aimed at ensuring UPI’s long-term sustainability, technological advancement and resilience against emerging risks.
With UPI transaction volumes showing exponential growth, significant and continuous investments in cybersecurity, fraud prevention and infrastructure upgrades is required.
The amendment is also necessary to encourage more companies to expand their operations in the digital payments sector by creating a self-sustaining revenue model and increasing competition, the government said.
Relying only on subsidies won’t be viable for the next wave of UPI growth, hence India needs a balanced framework to keep the payment system robust, inclusive and future-ready, the Finance ministry advocated.
Jairam Ramesh vs Nirmala Sitharaman
Finance minister Nirmala Sitharaman earlier accused Congress leader Jairam Ramesh of spreading “canards” over the Taxation and Other Laws (Amendment) Bill.
In a post on X, Ramesh said government assurances or tweets are no substitute for statutory safeguards.
Ramesh said the Finance minister’s response to his “so-called canards” hinges on five “dubious” claims, saying that the MDR applying only to merchants, and not to customers, is itself misleading.
“MDR is charged to merchants but it is inevitable that they pass transaction costs on to consumers through higher prices or differential pricing — just as they do with credit and debit card payments. Moreover, ‘merchants’ include medium and small businesses, kirana stores, and even street vendors, the very backbone of UPI adoption,” stated the Congress general secretary in-charge of Communications.