A notification issued by the Union ministry of finance (MoF) on 14 September 2026 under Section 10A of the Payment and Settlement Systems Act, 2007, specifies the electronic payment modes covered by the statutory prohibition on charges. These are RuPay-powered debit cards and UPI transactions of up to ₹2,000.
The notification states that no bank or system provider can impose, directly or indirectly, any charge on a person making or receiving a payment through the specified modes.
The significance lies in what the notification does not cover. By expressly limiting UPI transactions in the protected category to payments of up to ₹2,000, the government has created a statutory distinction between smaller UPI transactions and those above the threshold.
That distinction could provide the regulatory basis for introducing MDR on a limited set of higher-value merchant transactions, subject to a decision by the National Payments Corporation of India (NPCI) and the broader policy framework governing UPI.
The notification itself, however, does not introduce MDR or authorise a charge on UPI transactions above ₹2,000. It establishes the category of transactions for which banks and system providers are barred from imposing charges. Any actual MDR structure would require a separate decision and would have to comply with the applicable rules.
The move follows the government's clarification last month that consumers would continue to be protected from charges for using UPI, while leaving open the possibility of MDR for a limited category of merchant transactions above a specified threshold.
The government had said that any such MDR, if introduced, would not amount to a blanket charge on merchants. Person-to-person (P2P) UPI transactions would continue to remain free, while only a limited set of merchant transactions above a threshold could attract a nominal MDR.
It had also indicated that any such charge would be significantly lower than the MDR currently applicable to debit and credit card transactions.
What Has Changed?
The latest notification is important because it gives legal effect to the threshold. Earlier, Section 10A was framed broadly around electronic payments, with the government prohibiting charges on payments made through prescribed digital modes. The latest notification specifically identifies RuPay debit cards and UPI transactions up to ₹2,000 as the modes covered by the no-charge provision.
For consumers, this means there is no immediate change to the cost of making UPI payments of up to ₹2,000. Banks and system providers remain barred from imposing charges on either the sender or recipient for such transactions.
For the payments industry, however, the ₹2,000 cut-off is significant. It provides a clear dividing line around which a differentiated pricing framework could potentially be built.
In practical terms, a future MDR arrangement could therefore target certain merchant payments above ₹2,000 without imposing a charge on smaller UPI transactions or P2P transfers.
That does not mean every UPI transaction above ₹2,000 will become chargeable. The government's earlier clarification specifically ruled out a blanket MDR on merchants. The eventual scope, threshold, rate and categories of transactions would depend on subsequent decisions.
The distinction between consumer charges and merchant-side MDR is also important. MDR is generally a fee associated with processing a merchant payment and is not necessarily a charge imposed directly on the individual making the payment. Thus, the possibility of MDR on selected higher-value transactions does not automatically mean consumers will be charged for using UPI.
Why the ₹2,000 Threshold Matters
UPI has become deeply embedded in India's retail payments ecosystem, largely because transactions have been inexpensive and, for users, effectively free at the point of payment.
The absence of MDR on UPI has also been a major factor in its adoption by merchants, particularly small businesses. At the same time, payment service providers and banks have faced the cost of maintaining and processing the rapidly expanding UPI ecosystem without the conventional merchant fees associated with card payments.
The government has so far relied on incentives and other measures to support the UPI ecosystem rather than introducing a broad-based MDR.
The new notification does not overturn that approach. Instead, it creates room for a more targeted model in which smaller-value payments remain protected, while higher-value merchant transactions could contribute to processing costs.
This is particularly relevant because the notification covers transactions up to ₹2,000, rather than simply declaring all UPI payments charge-free.
The wording, therefore, matters. It does not impose a fee itself, but it removes the statutory no-charge protection for UPI transactions above the specified limit.
The next question is what NPCI and the government do with that regulatory space. If MDR is eventually introduced, the stated policy direction suggests that it would be restricted to selected merchant transactions above the threshold, rather than applied across the UPI ecosystem. P2P payments would remain outside such a framework.
For now, UPI users do not face a new charge as a result of Monday's notification. But the ₹2,000 line marks an important change in the legal architecture governing UPI charges—and potentially the first concrete step towards a pricing model for larger merchant transactions.
In short, the notification does not bring in MDR. It makes MDR on a defined category of UPI transactions above ₹2,000 legally possible, subject to subsequent policy and NPCI decisions.
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