Fact Check: Are All UPI Payments Going to Be Charged?

Social media is abuzz with the speculations that all UPI transactions could be chargeable. However, there is no truth to it.

Small Payments Likely to Remain Free

As per the reports, small UPI transactions between Person-to-Person (P2P) likely to remain free. This means that everyday payments for milk, vegetables, groceries, auto-rickshaws, taxis and other small purchases are unlikely to be affected. According to government estimates, this would cover only about 5% of all UPI transactions.

Officials said that even if MDR is introduced, most UPI users are unlikely to notice any change because 95% of transactions would remain unaffected.

Whereas, UPI transactions above Rs 2000 made to merchants could attract the charge.

Businesses May Absorb the Cost

As per the proposal, a Merchant Discount Rate (MDR) of 0.25% to 0.4% may be charged on UPI payments above Rs 2,000 made to merchants.

This is part of the Taxation and Other Laws (Amendment) Bill, introduced in Parliament by Finance Minister Nirmala Sitharaman. The Bill seeks to remove the current rule that does not allow banks and payment service providers to charge MDR on certain digital payment methods.

Government officials said no final decision has been taken on when these changes will come into effect.

What RBI Governor Says?

RBI Governor Sanjay Malhotra said it is too early to say how the charges, if introduced, will be collected. He said that maintaining and improving the country’s digital payment system costs money, and someone has to bear that cost. However, he did not confirm whether customers will have to pay the fee directly.

The RBI Governor said that the cost is already being borne in some form by the economy, even if users do not see it directly. He added that the government is still working on the proposal, and more clarity will come later.