UPI Payments Above ₹2,000 May Attract Fee Under Proposed Changes

Digital payments made through the Unified Payments Interface (UPI) could see a major policy change, with the government considering a proposal to permit the levy of a Merchant Discount Rate (MDR) on certain transactions above ₹2,000. The proposal, however, does not mean that UPI users will immediately have to pay a fee for making high-value payments. The proposed legal changes would create a framework under which an MDR could be introduced in the future.

Under the proposal being discussed, an MDR of around 0.3% to 0.5% could be imposed on eligible UPI transactions above ₹2,000. The proposed charge would primarily apply to merchants with an annual turnover of more than ₹1.5 crore. The fee would be paid by merchants to banks and payment service providers rather than being directly collected from customers.

The proposal has drawn attention because of the growing importance of UPI in India’s digital payment ecosystem. UPI has become one of the country’s most widely used payment systems, allowing consumers and businesses to transfer money instantly through mobile applications.

According to the report, transactions above ₹2,000 account for only about 5% of the total number of UPI transactions, but they represent nearly 65% of the overall transaction value. This means that while relatively few payments cross the proposed threshold, they account for a substantial share of the money transferred through the platform.

The possible introduction of MDR is being considered in the context of the costs involved in maintaining and operating the digital payments infrastructure. At present, UPI transactions have largely remained free for users, with the ecosystem supported through other mechanisms.