Govt Paves Way for Merchant Fee Above ₹2,000

NEW DELHI: In a major regulatory update for India’s digital payments landscape, the Department of Financial Services under the Ministry of Finance issued an official gazette notification confirming that no bank or payment system provider can impose charges—directly or indirectly—on Unified Payments Interface (UPI) transactions up to ₹2,000 or on RuPay debit card payments.

The notification exercises powers under Section 10A of the Payment and Settlement Systems (PSS) Act, 2007. It explicitly codifies statutory protection for small-ticket digital payments while enabling framework changes for high-value merchant transactions.

Retail consumers making routine peer-to-person (P2P) transfers or buying small everyday items will face zero fees. Data shows over 85% of person-to-merchant (P2M) transactions fall below the ₹500 mark.

The order clears the regulatory pathway to reintroduce MDR exclusively on large person-to-merchant transactions exceeding ₹2,000. The National Payments Corporation of India (NPCI) and its UPI Steering Committee will determine the exact MDR percentages for high-value transactions.

The zero-MDR mandate introduced in 2020 significantly accelerated digital adoption across India. However, banking and fintech institutions faced growing infrastructure and security costs, estimating operational expenditures of over ₹20,000 crore annually to maintain payment rails.

The latest notification aims to balance consumer convenience with long-term financial sustainability for payment aggregators and banks without burdening retail users.