Delhi woman quits using UPI for 3 months, shares how it changed her spending habits

Finance Minister Nirmala Sitharaman has clarified that users of the Unified Payments Interface (UPI) will not be charged for transactions, addressing concerns raised by opposition leaders and industry stakeholders. During the Monsoon session of Parliament, Sitharaman responded to criticism from Congress leader Jairam Ramesh, who warned that ordinary people could end up bearing the cost of a potential Merchant Discount Rate (MDR). She emphasized that any MDR would be levied on merchants, not on end-users, and would support the financial sustainability of the digital payments ecosystem. The clarification follows the passage of the Taxation and Other Laws (Amendment) Bill, 2026, by the Lok Sabha, which allows the government to introduce MDR on selected UPI transactions in the future. The bill, which modifies Section 10A of the Payment and Settlement Systems Act, 2007, provides the legal framework for the government to notify specific electronic payment modes or transaction categories that may be subject to charges. The amendment does not immediately impose any fees but enables the central government to decide on the introduction of MDR at a later stage. According to the government, if an MDR is introduced, it would apply only to a limited set of merchant transactions above a specified threshold. The rate is expected to range between 0.25% and 0.4%, significantly lower than the MDR currently applied to credit and debit card transactions. Routine purchases such as groceries, auto-rickshaw rides, and taxi fares are unlikely to be affected, as these transactions fall below the proposed threshold. Person-to-person (P2P) transactions will continue to be free of charge, as confirmed by the Ministry of Finance. The proposed changes aim to address the challenges faced by the payments industry in sustaining the UPI ecosystem. Industry experts have argued that the absence of MDR has made it difficult for banks and fintech firms to invest in infrastructure, innovation, and security. With UPI processing over 23.7 billion transactions valued at Rs 29.9 lakh crore in July alone, the need for a sustainable funding model has become increasingly pressing. The government has cited the necessity of continuous investment in cybersecurity, fraud prevention, and digital infrastructure as key drivers behind the proposed amendment. The amendment has sparked debates among policymakers and industry representatives. While some argue that the introduction of MDR could lead to increased costs for small businesses and potentially be passed on to consumers, others maintain that the current zero-fee model is unsustainable in the long term. The UPI and Services Steering Committee, chaired by the National Payments Corporation of India (NPCI), will evaluate the feasibility of introducing MDR once the amended bill receives parliamentary approval. The committee will also assess the impact of such a change on the broader digital payments landscape. Sitharaman criticized the opposition for disrupting parliamentary sessions, arguing that the proposed legislation could have been debated more effectively if members had engaged constructively. She noted that the bill was tabled during the Monsoon session, and the delays in discussion may have hindered timely deliberations. The government has maintained that the amendment is an enabling provision, not a direct imposition of charges, and that the decision to introduce MDR will depend on further consultations and assessments. Some reports have suggested that external pressures may have influenced the policy shift, but the government has categorically denied such claims. It reiterated that UPI was launched as an indigenous initiative in 2016 and has remained free for both users and merchants since January 2020. The government emphasized that the amendment is part of a broader strategy to ensure the long-term sustainability and competitiveness of India's digital payment infrastructure. Industry analysts predict that the introduction of MDR could open new avenues for revenue generation for banks and fintech firms, particularly for high-value transactions. However, the exact implementation details, including the threshold for applying MDR and the distribution of costs among different segments of the market, remain under review. The government has also expressed confidence that the proposed framework will promote greater competition and encourage more players to enter the UPI ecosystem, thereby enhancing the diversity and resilience of the digital payments space. With the amendment now in place, the focus shifts to the next steps in the regulatory process. The UPI and Services Steering Committee will convene to deliberate on the specifics of MDR, including its structure, application criteria, and potential implications for the market. Until then, UPI users can expect to continue enjoying the convenience and affordability of the platform, with the assurance that any future charges will be carefully managed to avoid undue burdens on consumers.