Onlykashmir.in News Desk
The Central Government has proposed a significant amendment to the Payment and Settlement Systems Act, 2007, a move that could eventually pave the way for charges on UPI transactions above ₹2,000. This is being described as the biggest regulatory shift in the Unified Payments Interface ecosystem since its launch in 2016.
At present, UPI and RuPay debit card transactions attract zero Merchant Discount Rate (MDR), the fee typically charged to merchants, not customers, to cover the cost of running digital payment infrastructure. The proposed change will grant the government the legal authority to decide, in future, which payment systems can be charged, what rate of MDR can be levied, and which categories of merchants can be exempted.
Officials have clarified that the amendment does not mean charges will be imposed immediately. It simply builds the legal framework that allows the government to introduce such charges whenever it deems necessary. Until 2019, MDR was charged on digital transactions, but the government waived it entirely to encourage adoption of cashless payments, absorbing the cost through subsidies to banks and payment service providers each year.
The push has paid off. UPI has grown into the world’s largest real-time payments network, with July alone recording transactions worth nearly ₹29.9 lakh crore across 23.66 billion transactions, according to recent data. Experts believe volumes could grow tenfold in coming years, intensifying pressure on banks, NPCI, and payment app providers such as Google Pay, PhonePe and Paytm, all of which continue to invest heavily in servers, cybersecurity, merchant onboarding and QR infrastructure without directly recovering costs from users.
Indications suggest that if charges are eventually introduced, small merchants, peer-to-peer transfers between friends and family, and transactions below ₹2,000 are likely to remain exempt, with the burden more likely to fall on large, high-turnover merchants who can better absorb such costs.
RBI Governor Sanjay Malhotra, responding to questions on the issue following the latest Monetary Policy Committee meeting, acknowledged that some cost recovery mechanism will eventually be required to keep the digital payments infrastructure sustainable, though he did not specify who would ultimately bear the burden, the government, banks, or the public.
For now, the amendment only creates the legal groundwork. No final decision on actual charges has been taken.
