Big Relief for UPI Users! Government Bans Transaction Charges on Payments Up to ₹2,000

New Delhi: In a major move aimed at strengthening India’s digital payments ecosystem, the Central Government has prohibited banks and payment system providers from imposing transaction charges on UPI payments of up to ₹2,000.

According to the Ministry of Finance, the restriction has been introduced under Section 10A of the Payment and Settlement Systems Act, 2007. Under the provision, users cannot be charged either directly or indirectly for making or receiving payments of up to ₹2,000 through debit cards or UPI.

The government said the move is intended to encourage wider adoption of digital payments and support the continued growth of India’s digital economy.

No Charges on Small UPI Transactions

The decision provides greater clarity for consumers and businesses using UPI for everyday payments. Transactions within the ₹2,000 limit cannot attract charges from banks or payment system providers under the government’s stated framework.

The move is expected to support India’s growing preference for instant digital payments, particularly for small-value transactions.

MDR Proposal for Larger Merchant Payments

The government’s latest clarification comes after discussions in August about the possibility of introducing a nominal Merchant Discount Rate (MDR) on certain UPI merchant transactions above a specified threshold.

At the time, the government indicated that ordinary consumer payments and person-to-person (P2P) transactions would continue to remain free.

The distinction is significant because UPI has become a major part of India’s everyday payment infrastructure, with millions of consumers and businesses relying on it for transactions ranging from small purchases to larger payments.

Government Rejects Claims of External Pressure

The Ministry of Finance has also strongly rejected reports suggesting that external forces or foreign interests were responsible for the proposed changes to India’s digital-payment policy.

The ministry described such claims as baseless, false and misleading, emphasizing that the government’s focus is on strengthening India’s domestic digital infrastructure.

Focus on a Sustainable Digital Payment Ecosystem

The government said its broader objective is to ensure that India’s digital payment infrastructure remains sustainable, competitive and capable of supporting the country’s rapidly expanding digital economy.

With UPI playing an increasingly important role in India’s financial ecosystem, policymakers are balancing two priorities: keeping digital payments affordable for consumers while ensuring that the underlying payment infrastructure remains financially sustainable.

For everyday users, the key takeaway is clear: UPI payments of up to ₹2,000 remain protected from transaction charges under the government’s stated rules.