The amendment to the Payment and Settlement Systems Act (PSS Act) of the Ministry of Finance is aimed at the enhancement of Financial Inclusion, ensuring the long-term viability of UPI improving technological evolution, and making the system resilient to the risks appearing in the future.
The Government of India reiterates that:
- P2P transactions to remain free: Users will not be charged for Person-to-Person(P2P) transactions
- Nominal MDR for retailers: MDR to be introduced only for select transactions. When MDR comes into force the Merchant Discount Rate (MDR) charges will only be applied to certain issued merchant transactions after a certain threshold is reached and at very nominal rates.The rates will be lower than the MDR levied for debit and credit cards
- Almost no charges for merchants: The vast majority of UPI transactions will be free for merchants. If the MDR is introduced, this fee will only apply to large transactions.
After the approval of the Taxation and Other Laws (Amendment) Bill of 2026, which amends Section 10A of the Payment and Settlement Systems Act, 2007. The amount of MDR, if needed, will be defined by the "UPI and Services Steering Committee,".
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What are the reasons for revising the Payment and Settlement Systems Act?
The recent modifications to the Payment and Settlement Systems Act (PSS Act) have caused controversy, especially since its interpretation seems erroneous, in that people think that it is meant to charge ordinary users. In reality, the amendment is an enabling clause that ensures UPI’s reliability for the future.
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UPI’s Growth: With constantly increasing transaction volumes, making 2,366 crore transactions accounting for ₹29.9 lakh crore in July 2026 alone. The system continuously requires significant cybersecurity, fraud protection and technological advancement updates.
Expansion of the Market: To increase competition means inviting more companies to operate in the market; yet this implies the necessity to start having the self-sustaining revenue model.
Self-sustainability: Relying on subsidies should not happen if the growth plan is to evolve from this point. A balanced framework is required to ensure that UPI remains robust, inclusive and future-ready.
The Indian Government reaafirmed that there will be no fee on UPI to people, there will be no fees for daily transactions for people, any future MDR will be low and will only apply to a limited category of merchant transactions and UPI continues to be India’s premier digital innovation that is expanding around the world.
UPI launched in 2016-17, has revolutionized the Indian digital payments space and turned it into one of the most inclusive and dynamic payment systems in the world. Beginning as a daring experiment in real-time, interoperable payments, UPI has become a global standard in payments today, handling trillions of transactions each month.
Today, UPI is the world’s largest processing system in real-time payments operating in 11 foreign countries with great interest from many more.
UPI is a national project developed by Indians for Indians. It has been promoted, financed and nurtured for ten years.
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