UPI: There is a new update for UPI users. RBI Governor Sanjay Malhotra recently addressed the potential for charges on UPI payments exceeding Rs 2,000, stating that it’s premature to make any definitive comments. He emphasized that the costs associated with maintaining the payment system must be covered, but it remains unclear whether this burden will fall on the government, businesses, or another party.

As of now, there are no new charges for UPI transactions, and the Taxation and Other Laws (Amendment) Bill, 2026, does not propose any Merchant Discount Rate (MDR) or a Rs 2,000 cap on UPI payments. However, some government officials have hinted at the possibility of allowing an MDR of less than 0.5% for UPI transactions over Rs 2,000 made to merchants, though no official decision has been reached.

MDR, or Merchant Discount Rate, refers to the fee that businesses incur when banks or payment service providers process their digital payments, and it is not charged directly to customers. The proposed bill aims to give the government the authority to decide which digital payment methods will maintain zero MDR and which will not. If enacted, this could lead to the imposition of MDR on specific transaction categories in the future. The discussion around the Rs 2,000 limit has gained attention because transactions above this amount account for only about 5% of total UPI transactions but represent a significant 65% of the overall transaction value. Despite this, no official announcements have been made regarding the implementation of such a limit or the associated rates.

 

Why did the government remove MDR earlier?

 

In January 2020, the government reduced the MDR on UPI and RuPay debit cards to zero. This was intended to promote digital payments. Later, banks and payment companies were also given incentives for certain transactions. In recent months, a parliamentary committee, banks, and payment companies have been demanding a sustainable revenue model to cover the costs of running the UPI network. The final decision rests with the government.