UPI payments up to Rs 2,000 stay free under a new gazette shield

The Finance Ministry notified on 14 September that banks and payment-system providers cannot impose any direct or indirect charge on Unified Payments Interface transactions of up to Rs 2,000, or on payments made with RuPay-powered debit cards.

The gazette uses Section 10A of the Payment and Settlement Systems Act, 2007. The operative sentence is plain: no bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment by using the electronic modes of payment specified. The specified modes are RuPay debit cards and UPI transactions up to Rs 2,000.

The notification follows last month's amendment to the same Act, which gave the Centre power to name the electronic modes that stay protected from charges and opened a legal path away from a blanket zero merchant discount rate. Industry estimates cited by The Telegraph put a possible future MDR on selected merchant UPI payments above the threshold in the range of 0.25 to 0.5 percent. Government officials, speaking to Reuters in August, said person-to-person transfers and consumer payments would stay free and that any fee, if introduced, would sit with merchants.

The Rs 2,000 line is not a small slice of value. Coverage of the gazette noted that transactions above that amount are about 5 percent of UPI volume and about 65 percent of UPI value. Protecting the mass of small payments while leaving the high-value merchant tail unspecified is the design. The text does not impose a charge above Rs 2,000. It declines to immunise those payments from a future charge.

Rahul Gandhi attacked the government on X, saying it had quietly opened the door to imposing fees on UPI and repeating the 5 percent volume and 65 percent value split. The ministry's position is that the door being opened is a revenue path for banks and apps that have carried UPI's cost, and that the consumer-facing small payment remains free by statute.

UPI now clears a dominant share of India's retail digital payments. Banks and apps have argued for years that zero MDR on all flows leaves them paying for fraud controls, uptime and customer support with no per-transaction income. PhonePe, Razorpay and MobiKwik executives backed some form of fee at a recent industry forum. Consumer groups have treated any fee as a breach of the promise that made UPI ubiquitous.

Parliament's amendment last month is what made a split regime possible. Before that change, the political and legal default was zero MDR across UPI. After it, the Centre can name protected modes and leave others outside the shield. Monday's gazette is the first use of that power. It names two modes and stops there.

Banks wanted a fee on the high-value tail because that tail is where acquirer costs concentrate. Consumer groups wanted no fee on any UPI scan. The notification gives each side a sentence they can quote. The sentence that moves money has not been written. Until it is, a Rs 2,001 merchant payment is free in the market even if it is unprotected in the Act.

For users the immediate instruction is simple. A Rs 500 grocery scan cannot attract a bank or system-provider charge under this notification. A Rs 25,000 contractor payment is not given the same statutory shield. Watch the next gazette, not this one, for any number that actually moves money from a merchant to an acquirer.