The finance ministry has notified amendments to the Payment and Settlement Systems Act, 2007, exempting Unified Payments Interface (UPI) transactions and RuPay debit card payments up to ₹2,000 from merchant discount rate (MDR) charges, according to a gazette notification dated September 14. This change allows MDR charges to be reintroduced on UPI payments exceeding ₹2,000, reversing the earlier blanket ban on MDR fees for all UPI transactions.
The amendment follows the passage of the Taxation and Other Laws (Amendment) Bill, 2026, which modified Section 10A of the 2007 Act. Previously, banks and system providers were barred from imposing any charges on UPI payments. The new rules empower the government to specify which electronic payment modes are exempt from MDR fees and set a ₹2,000 threshold for exemption. The National Payments Corporation of India (NPCI)-led UPI and Services Steering Committee will now determine the exact MDR charges for payments above this limit.
This move impacts the digital payments ecosystem by allowing merchants and banks to charge MDR fees on higher-value UPI transactions, potentially altering cost structures for payment acceptance. It marks a shift from the earlier policy that promoted zero MDR fees on all UPI payments, which had encouraged widespread adoption. The amendment aligns with efforts to balance the interests of payment service providers and merchants while maintaining affordability for small-value transactions.
The government’s notification on September 14 sets the stage for the NPCI and its steering committee to finalize MDR fee structures for transactions above ₹2,000, a key development for stakeholders in India’s digital payments landscape.