Government Bars Bank Charges on UPI Transactions Up to ₹2,000 and RuPay Debit Card Payments

The Union Ministry of Finance has issued a formal notification barring banks and system providers from imposing direct or indirect fees on Unified Payments Interface (UPI) transactions of up to ₹2,000 as well as RuPay-powered debit card payments. Issued under Section 10A of the Payment and Settlement Systems Act, 2007, the notification explicitly specifies these modes as protected electronic payment methods, guaranteeing that peer-to-peer (P2P) transfers and low-value peer-to-merchant (P2M) payments remain free of transaction charges for ordinary consumers and small merchants.

The regulatory clarification follows recent legislative amendments under the Taxation and Other Laws (Amendment) Bill, 2026, which unlinked Section 10A from Section 269SU of the Income-tax Act. While the statutory change created enabling provisions to potentially introduce a targeted Merchant Discount Rate (MDR) on high-value corporate transactions to support infrastructure costs, the latest executive order protects small-value transactions. Official financial metrics indicate that person-to-merchant payments exceeding ₹2,000 constituted only 4% of total transaction volume in FY 2025–26, yet represented roughly two-thirds of the ₹314 lakh crore total processed value across the UPI network.

Key aspects of the government notification on digital payment charges include:

• Statutory Protection: Prohibition of direct or indirect bank fees on RuPay debit cards and UPI transactions of up to ₹2,000.
• Legislative Context: Clarifies scope following amendments to Section 10A of the Payment and Settlement Systems Act, 2007.
• P2M Transaction Profile: Low-value payments under ₹2,000 account for approximately 96% of all merchant transactions.
• Subsidized Ecosystem Support: Continuance of government incentive schemes compensating banks and payment service providers for low-value transaction upkeep.

Key Implications

The Ministry of Finance notification provides essential regulatory certainty to hundreds of millions of daily digital payment users across India. By insulating low-value merchant transactions and peer-to-peer transfers from processing fees, the government reinforces public trust and sustains financial inclusion across retail ecosystems.

Furthermore, establishing clear parameters for potential high-value MDR frameworks helps balance consumer protection with long-term technological sustainability. As digital payment volumes expand, maintaining robust server infrastructure, cybersecurity defenses, and fraud prevention mechanisms will remain central to supporting India's digital economy.