Gazette shields UPI under Rs 2,000 and leaves the door open above it

The Finance Ministry on 14 September notified that no bank or payment-system provider may levy a charge, directly or indirectly, on a person who pays or receives money through RuPay debit cards or through Unified Payments Interface transfers of up to Rs 2,000. The gazette looks like a consumer protection notice. Read with last month's amendment to Section 10A of the Payment and Settlement Systems Act, 2007, it is also the legal floor for a merchant discount rate on everything above that line.

Parliament removed the blanket ban on bank charges for specified electronic modes when it passed the Taxation and Other Laws (Amendment) Bill, 2026. Finance minister Nirmala Sitharaman told the Rajya Sabha on 11 August that the change was an enabling provision, not a tax on users. Street hawkers, cab drivers and kirana shops would stay outside any fee, she said. The fee, if one arrives, would sit on the merchant. Monday's notification names the two modes that remain charge-free: all RuPay debit-card payments, and UPI tickets of Rs 2,000 or less. Person-to-person transfers stay free because they are not merchant acquiring.

The arithmetic is why the threshold matters. Only about 4 percent of person-to-merchant UPI payments in 2025-26 were larger than Rs 2,000. Those tickets accounted for close to two-thirds of P2M value. UPI as a whole cleared more than 24,000 crore transactions worth about Rs 314 lakh crore in that year. CareEdge Ratings has put P2M at 29 percent of UPI value, with 67.2 percent of that P2M value sitting above Rs 2,000. A thin slice of merchants, in other words, generates most of the money that would fund rails, fraud controls and settlement.

Industry sources have talked about an MDR of 0.25 to 0.5 percent. Reporting around the NPCI-chaired UPI and Services Steering Committee puts the working assumption nearer 0.4 percent on merchant tickets above the floor. Credit-card MDR in India still runs at 1 to 3 percent. Debit-card MDR is typically 0.8 to 0.9 percent. Even a 0.4 percent UPI rate would be cheaper than cards and more expensive than the zero that large platforms have enjoyed since MDR on UPI was waived in 2019-20.

Who pays is the political fight. Rahul Gandhi wrote on X that the government had quietly opened the door to fees and that tickets above Rs 2,000 are a small share of volume but most of the value. That is the same distribution the ministry's own numbers describe. The opposition line is that marketplaces and large retailers will push the cost back onto prices. The official line is that consumers never see a line item and that small merchants stay exempt. Neither claim can be tested until the steering committee publishes a rate and a merchant definition.

Banks have argued for years that zero MDR on a rail that now moves hundreds of lakh crore leaves the cost of uptime, cybersecurity and dispute handling on their books. NPCI and the apps sit in the middle. The committee has to split any fee among issuing banks, acquiring banks, payment aggregators and the switch. Until it does, Monday's gazette is a ceiling for small tickets and a permission slip for large ones.

The consumer test will be simple. If a Rs 1,800 grocery scan stays free at the kirana and a Rs 8,000 cart on a marketplace shows no extra rupee at checkout, the ministry's promise holds on the user side. The merchant test is whether large platforms absorb 0.4 percent or pass it through. That decision will not appear in a gazette. It will appear in invoice totals after the committee sets the number.

For now the law is this: RuPay debit is free at every value. UPI is free at or below Rs 2,000. Above that line, the statute no longer forbids a charge. The rate is not yet written.