India Bans Bank Charges on UPI and RuPay Payments Up to Rs 2,000

Digital payments in India, especially through the Unified Payments Interface (UPI) and RuPay debit cards, have surged in popularity over recent years. The government has long promoted zero charges on these platforms to encourage cashless transactions.

However, as digital payment volumes grew, banks and payment companies raised concerns about the cost of managing these systems. Discussions began about whether to introduce fees, especially for larger transactions.

On September 14, 2026, the Indian government officially notified that there would be no direct or indirect charges on UPI transactions up to Rs 2,000 and RuPay debit card payments. This was part of amendments to the Payment and Settlement Systems Act, 2007, aimed at protecting consumers and small merchants.

Shortly after, it became clear that the government had not yet decided what charges, if any, would apply to transactions above this threshold. Banks and payment companies began internal discussions about possible fees on higher-value payments.

By September 15, 2026, it was announced that merchants would face a 0.4 percent fee for UPI transactions above Rs 2,000. This merchant discount rate (MDR) will apply to select merchant payments, while person-to-person and small merchant transactions remain exempt. The new fee structure is set to take effect from October 15, 2026, giving banks and payment platforms time to update their systems.

Officials clarified that consumers will not pay these new charges. Nearly 96 percent of UPI merchant transactions are below Rs 2,000, so most users and small businesses will not be affected. A government-appointed panel will further review the MDR framework for large transactions.

As of now, UPI and RuPay debit card payments up to Rs 2,000 remain free of any bank charges. For larger merchant transactions, a 0.4 percent fee will soon apply, but only merchants will be charged.

The vast majority of everyday digital payments in India are not affected, and the government continues to emphasize consumer protection and digital inclusion. The fee changes are mainly targeted at higher-value merchant transactions.

The upcoming panel review could lead to further changes in the fee structure for large digital payments. Banks and payment firms will be monitoring how the new charges impact transaction volumes and merchant adoption once the fees take effect in October.