UPI to remain free for users; most merchant transactions to stay zero-charge

India’s Unified Payments Interface (UPI) will continue to be free for users, and the vast majority of merchant transactions are expected to remain free as well, the government has said. The clarification offers reassurance to millions of households and small businesses that depend on UPI for quick, convenient digital payments.

UPI has become a backbone of everyday commerce—helping customers pay instantly and helping merchants receive funds with minimal friction. By reiterating that users will not be charged for UPI transactions, the government is signalling continuity and stability for India’s rapidly expanding digital payments ecosystem.

What the government said on UPI pricing According to the government’s statement, UPI will remain free for users. On the merchant side, it said the vast majority of transactions would continue to remain free.

It also addressed questions around the Merchant Discount Rate (MDR), which is the fee sometimes charged to merchants on digital payment transactions. The government said that if MDR is introduced in the future, it would apply only to a limited set of merchant transactions that are above a specified threshold.

Importantly, it added that any such MDR would be at a nominal rate, and that it would be lower than typical MDR levels associated with debit and credit card transactions.

For many small shops, kirana stores, service providers and micro-entrepreneurs, even a small per-transaction charge can influence whether they accept a payment mode. The emphasis on a limited, threshold-based approach aims to protect smaller merchants while keeping room for a calibrated policy framework for larger-value transactions.

What it means for consumers and small merchants For consumers, the message is straightforward: UPI transactions will continue to be free, supporting the habit of making quick digital payments without worrying about additional costs.

For merchants, particularly micro and small enterprises, the reassurance that most transactions will remain free helps sustain confidence in UPI acceptance—especially in sectors where margins are tight and transaction values are modest.

If a future MDR is considered only for a narrow segment of higher-value merchant transactions, the impact would likely be concentrated on larger ticket sizes, rather than day-to-day purchases such as groceries, local transport, small dining bills, pharmacy items or routine services. This approach can help preserve the affordability and reach of UPI at the grassroots level while allowing policymakers to discuss sustainability options in a measured way.

A steady signal for India’s digital payments momentum UPI’s success rests on trust, ease of use and widespread availability—from metros to smaller towns. Policy clarity on charges plays a major role in keeping that trust intact and ensuring that adoption continues across consumer groups and business categories.

The government’s position also supports India’s broader push towards formalisation and digital inclusion. When more payments happen digitally, it can improve transparency, simplify reconciliation for businesses, and enable better access to formal financial services over time.

At the same time, keeping the door open to a targeted, nominal MDR—only if introduced—indicates a preference for balance: protecting mass usage while retaining flexibility for a carefully scoped framework that may apply to certain high-value merchant transactions.

**Why it matters:** UPI staying free for users and mostly free for merchants supports everyday digital commerce, helps small businesses keep costs low, and strengthens confidence in India’s fast-growing payments ecosystem—while keeping future policy options narrowly targeted and predictable.