Banks cannot impose charges on UPI payments of up to Rs 2,000, govt says

The Central government on Monday announced that banks cannot impose any charges on Unified Payments Interface (UPI) transactions of upto Rs 2,000 or debit card payments by RuPay card.

The Finance Ministry notified changes in the Payment and Settlement Systems Act to help clarify the rumours on upcoming charges on UPI transactions as the government specified RuPay-powered debit cards and UPI ⁠transactions of up to Rs 2,000 as "electronic modes of payment," and said no bank or system ‌provider shall impose any direct or indirect charge ⁠on a person making or receiving payments through these modes.

"In exercise of the powers conferred by section 10 A of the Payment and Settlement Systems Act, 2007 (51 of 2007), the Central Government hereby specifies the following electronic modes of payment, namely:– (i) Debit Card powered by RuPay; and (ii) Unified Payments Interface (UPI) transactions upto Rs. 2,000. No bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment by using the electronic modes of payment specified in paragraph above," the Finance Ministry said in an official notification.


Also read: UPI to remain free for consumers, says Payments Council of India

The government ⁠gazette notification comes a month after the Parliament passed amendments to the Act paving the way for the Centre to allow banks and payment service providers to levy charges on UPI transactions and other notified digital payment modes.

The number of banks live on UPI has increased from 44 in FY2016-17 to 703 by FY2025-26, and stood at 741 as of July 2026, according to government data. Monthly transaction volumes crossed 2,300 crore for the first time in May 2026, when they reached 2,320 crore, before rising further to a record 2,366 crore in July. Annual transaction volume still grew 30% in FY2025-26, while transaction value increased 21%.

"Will consumer pay any UPI charge - No. UPI has remained free for consumers since its launch and every Indian will continue to make this instant digital without paying any transaction charge," Finance Minister Nirmala Sitharaman had said, clarifying that the Bill does not propose any tax or transaction charge on UPI.

The Bill also proposed to remove the linkage between the Payment and Settlement Systems Act and the Income Tax Act, and provide legal backing to the government to modify the zero-MDR framework of UPI and RuPay card transactions.

Annual UPI transaction volumes have risen from 1.78 crore in FY2016-17 to more than 24,162 crore in FY2025-26, an almost 13,000-fold increase. The scale of usage is now equivalent to about 66 crore transactions a day, while UPI accounted for 84% of India’s digital payments in FY2025-26, according to data released by the Ministry of Finance.

The numbers clearly indicate that UPI is no longer merely an alternative to cash or cards but has become deeply embedded in routine payments.

The platform’s enormous volumes are being driven primarily by frequent, low-value transactions, from everyday purchases to routine retail payments. Person-to-merchant transactions account for 63% of total UPI transaction volume, and 86% of these merchant payments were below Rs 500 in FY2026.

UPI is handling a very different category of payments through its person-to-person network. P2P transactions account for a smaller 37% share of total volume but contribute 71% of overall transaction value.

UPI serves two distinct functions: a high-frequency payment rail for small merchant transactions and a channel for relatively larger transfers between individuals.

Its expansion in transaction value reinforces this broader role, with annual value rising from Rs 0.07 lakh crore in FY2016-17 to around Rs 314 lakh crore in FY2025-26.