Govt: No Bank Charge On UPI Payment Up To Rs 2,000, Pg1

Key Highlights:

• The Ministry of Finance notified that banks cannot levy charges on UPI transactions up to Rs 2,000 and RuPay debit card payments.
• This decision allows for potential charges on higher-value person-to-merchant (P2M) UPI transactions.
• The UPI and Services Steering Committee, led by NPCI, will determine the charges for transactions above Rs 2,000.
• The notification follows amendments made by the Taxation and Other Laws (Amendment) Bill, 2026.

Detailed Insights:

• The Taxation and Other Laws (Amendment) Bill, 2026, amended Section 10A of the Payment and Settlement Systems Act, 2007.
• This amendment removed the exemption from bank charges for electronic payments mandated under Section 269SU of the Income Tax Act, 1961.
• Section 269SU applies to businesses with an annual turnover exceeding Rs 50 crore, primarily large merchants.
• Payments industry officials have suggested a Merchant Discount Rate (MDR) of 0.4-0.5% for higher-value UPI payments to large merchants.
• This move aims to ensure the financial sustainability of the UPI ecosystem, which incurs significant operational costs.
• Since January 2020, there has been no MDR on RuPay debit cards and UPI transactions to encourage digital payments adoption.
• The government currently provides subsidies for low-value BHIM-UPI and RuPay debit card transactions to small merchants.
• In 2025-26, the subsidy payout under this incentive scheme was Rs 2,196.21 crore.
• Although only 4% of P2M UPI payments exceed Rs 2,000, they constitute about two-thirds of the total transaction value.

Key Concepts Involved:

• UPI (Unified Payments Interface): An instant real-time payment system developed by NPCI for inter-bank transactions.
• RuPay Debit Card: An Indian domestic card payment network, developed by NPCI, facilitating electronic payments.
• Merchant Discount Rate (MDR): A fee charged to merchants by banks for processing electronic transactions.
• Payment and Settlement Systems Act, 2007: The legal framework that regulates and supervises payment and settlement systems in India.
• Section 269SU of Income Tax Act, 1961: A provision mandating certain businesses to offer electronic modes of payment.