Ministry of Finance Bars Charges on UPI Payments Up to Rs 2,000 via Gazette Notification

Key facts

• The Ministry of Finance (MoF) issued a gazette notification on Monday under the Payment and Settlement Systems Act, 2007, specifying that banks and payment system providers cannot impose charges on UPI transactions of up to Rs 2,000.
• The notification follows concerns raised over possible charges on UPI payments after Parliament passed the Taxation and Other Laws (Amendment) Act, which proposed changes to the legal framework governing payment systems.
• Transactions up to Rs 2,000 will remain charge-free, while the notification leaves scope for levying charges on transactions above this threshold.
• The government specified two categories of electronic payments under the Act, RuPay debit card transactions and UPI payments up to Rs 2,000, for which banks and payment system providers cannot recover charges from customers either directly or through indirect means.
• In August, the Finance Ministry had stated that consumers would not have to pay transaction charges for UPI payments and that person-to-person UPI transactions would remain free.
• The government indicated a Merchant Discount Rate (MDR) could be introduced in the future for certain merchant transactions, applying only above a specified threshold and at rates significantly lower than those on debit and credit card transactions.
• MDR is the fee paid by merchants to banks and payment service providers for processing digital transactions; credit card transactions generally carry MDRs of around 1-3 per cent, while debit card transactions can attract charges of up to 0.9 per cent.