Banks Sit on the Panel That Will Price High-Value UPI

India’s finance ministry has locked UPI payments of up to Rs 2,000 as legally free, and left every shop ticket above that line to a bank-heavy panel.

The Department of Financial Services issued gazette order S.O. 5067(E) on September 14 under Section 10A of the Payment and Settlement Systems Act, 2007. It names two electronic modes that no bank or system provider may charge, directly or indirectly: RuPay debit cards, with no amount cap, and Unified Payments Interface transfers up to Rs 2,000. Person-to-person UPI stays free. The merchant rate on larger shop payments is the piece the order does not settle.

The Gazette Protects Payments Up to Rs 2,000

The order is a floor, not a fee schedule. It tells banks and payment companies they cannot put a charge on the person sending or receiving a covered payment, and it blocks the same fee if it is dressed up as some other levy. RuPay debit sits in that protected list with no rupee ceiling. UPI does not. The words “upto Rs. 2,000” are the entire high-value opening.

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.

S.O. 5067(E), Department of Financial Services, September 14, 2026

Parliament cleared the legal path on August 6, when the Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026, in a monsoon session that ended on August 13. The old Section 10A had been tied to payment modes listed under Section 269SU of the Income-tax Act, which had kept BHIM-UPI and RuPay debit at zero merchant discount rate since January 2020. The amendment lets the Centre notify which modes stay free. September 14 is that list. Everything the list omits is now a pricing question for the rails, not a statutory ban.

Congress treated the omission as the point. Party communications chief Jairam Ramesh said the government was “using new laws bulldozed through Parliament to start the process of charging for UPI,” and that there is “NO explicit protection for any transaction above this cap.” He added that “the stage is clearly being set for all of us to pay a fee for UPI transactions,” and that a later order could move the cap, even onto daily person-to-person transfers. Congress president Mallikarjun Kharge called the shift a digital payments tax and said merchants would pass it on. Leader of the Opposition Rahul Gandhi said a “compromised” Prime Minister Narendra Modi was “once again surrendering” to American pressure. The finance ministry has called claims of external influence “unfounded, completely false, and misleading.”

A 22-Member Panel Will Set Any Merchant Rate

The rate, if there is one, will not be written in the Lok Sabha. It goes to the 22-member UPI and Services Steering Committee at the National Payments Corporation of India, the company that runs the switch. NPCI managing director and chief executive Dilip Asbe and executive director for growth Sohini Rajola were due to lead a meeting of that panel on September 15. NPCI had not issued a public comment on the sitting.

The roster is the story the political fight skips. Sixteen of the 22 seats are banks. Four belong to the apps that actually sit on phones: PhonePe, Google Pay, Paytm’s parent One97 Communications, and CRED. The last two seats are industry bodies, the Indian Banks’ Association and the Payments Council of India. There is no kirana association, no e-commerce merchant group, and no consumer body at the table that will price the shop.

WHO HOLDS THE 22 SEATS

PhonePe also has a second door into the argument. Rahul Chari, the company’s founder and chief technology officer, chairs the Payments Council of India’s UPI committee, with Google Pay’s Kunal Rana as co-chair. The people who want a merchant rate on large tickets are the people writing the circular. The people who would pay it are not in the room.

Four Percent of Shop Payments Hold 67.2% of Their Value

The Rs 2,000 line looks generous on a count of pings and tight on a count of rupees. Industry estimates put only about 4 percent of person-to-merchant UPI payments above Rs 2,000, so about 96 percent of those shop pings stay inside the free band. CareEdge Ratings finds that 67.2 percent of person-to-merchant value sits above that same line. A vast number of tea-stall scans would remain untouched. A much smaller number of large checkouts is where the money is.

The finance ministry’s own decade note, issued when UPI turned ten on August 25, puts person-to-merchant traffic at 63 percent of volume and person-to-person transfers at 71 percent of value, which leaves shops at 29 percent of rupees for FY 2025-26. In that year the rails handled 24,162 crore payments in FY 2025-26 worth Rs 314 lakh crore. Some 86 percent of shop payments were below Rs 500. The free band is the daily habit. The open band is the fat ticket.

UPI TICKET MATH, FY 2025-26

August, the latest full month in NPCI’s product tables, showed 24.51 billion UPI payments in August worth Rs 29.82 lakh crore, with 752 banks live. Shop payments were 15.51 billion of that count, 63 percent, and Rs 8.95 lakh crore of the value, 30 percent. More than 55 crore people now use the rails. UPI was 84 percent of India’s digital payments in FY 2025-26 and, by the IMF’s 2025 reading cited in the ministry note, 49 percent of the world’s real-time payment volume. The switch is no longer a pilot that can run on goodwill.

How Zero MDR Became the Default in 2020

Until late 2019, NPCI capped UPI merchant discount rate at 0.30 percent with a ceiling of Rs 100 a ticket. Finance minister Nirmala Sitharaman’s July 2019 Budget asked large firms to offer low-cost digital modes and said the Reserve Bank and banks would absorb the cost from the cash they would no longer handle. Zero MDR on RuPay debit and BHIM-UPI went live on January 1, 2020. Adoption did what the subsidy was built to buy.

THE MDR CALENDAR

1. July 2019: The Union Budget proposes zero merchant discount rate on UPI and RuPay and says banks and the Reserve Bank will bear the cost.
2. January 1, 2020: Zero MDR takes effect on RuPay debit and BHIM-UPI shop payments.
3. FY 2021-22 to FY 2024-25: The Department of Financial Services pays Rs 8,276 crore in incentives, year by year Rs 1,389 crore, Rs 2,210 crore, Rs 3,631 crore and Rs 1,046 crore.
4. March 2025: A revised incentive covers only low-value BHIM-UPI shop payments at small merchants, at 0.15 percent, and drops RuPay debit from the payout.
5. August 6, 2026: Lok Sabha passes the bill that lets the Centre notify which electronic modes stay free of charges.
6. September 14, 2026: S.O. 5067(E) names RuPay debit and UPI up to Rs 2,000 as the protected modes.
7. September 15, 2026: The NPCI steering committee is due to meet on the rate above that line.

Those incentives never matched what the industry said the rails cost. The Department of Financial Services told the parliamentary Standing Committee on Finance that person-to-merchant processing was running at about Rs 20,700 crore a year. Payment executives have put the pure switch-and-tech cost nearer 3 to 4 basis points a payment, a much thinner number, which is why the fight is as much about who earns as about who spends. RBI Governor Sanjay Malhotra put the political fact in one line in 2025: “Someone is paying for it.” Asbe had already said in 2024 that large merchants could one day pay a “reasonable” charge while smaller shops stayed protected. The September order is that split, written into a gazette.

Merchants Sit Outside the Room That Prices Them

Bankers around the talks have been working with a merchant discount rate near 40 basis points, or 0.4 percent of the ticket, on qualifying shop payments above Rs 2,000. On a Rs 5,000 bill that is Rs 20. On a Rs 10,000 bill it is Rs 40. A Congress graphic that moved on September 15 put the same tickets at 0.5 percent, Rs 25 and Rs 50, as if the buyer paid the levy. The gazette sets no such rate and names no buyer fee. The live question is whether a large merchant eats 40 basis points or prints them on the receipt.

People in those talks have sketched a split that would send about 40 percent of the fee to the issuing bank, about 16 basis points, and 30 percent each to the app and the acquiring bank, about 12 basis points apiece. Credit-card merchant rates still run about 1 to 3 percent, and debit cards about 0.8 to 0.9 percent, so even 0.4 percent would be cheap beside cards and expensive beside the last six years of free UPI. Comparables circulating with the committee put merchant charges at about 0.33 percent on Brazil’s Pix and about 0.40 percent in China.

Sitharaman said in August that any merchant discount rate would apply to merchants, not end users, and that street hawkers, cab drivers, kirana stores and small merchants would stay out of it. That promise is a policy line, not a sentence in S.O. 5067(E). The order does not say the rate applies only to large merchants. It leaves that cut to the same 22 people who would collect it. A shop that cannot eat 0.4 percent has three ordinary moves: raise the listed price, steer the customer to cash, or split a Rs 2,400 cart into two scans. None of those moves needs a new law.

What Stays Free After the September Notification?

For a user sending money to a friend, nothing in the gazette changes. For a user paying a shop Rs 1,999, nothing in the gazette changes either. RuPay debit is the quieter winner: the order protects those card payments at every amount, which is a harder shield than UPI now has.

WHAT THE ORDER STILL MAKES FREE

• Person to person: Every UPI transfer between people stays free at every amount, as the government restated when the bill moved in August.
• Small shop UPI: Sender and receiver are both protected on UPI shop payments up to Rs 2,000, including any attempt to hide the fee under another name.
• RuPay debit: Debit cards powered by RuPay stay in the no-charge list with no rupee ceiling, on both sides of the payment.
• The unsent circular: No merchant discount rate on UPI above Rs 2,000 is in force until NPCI publishes one, and the September 15 sitting had not produced that paper.

The only figure with the force of law is still the Rs 2,000 cap in S.O. 5067(E). Until the panel writes a rate, the high-value shop slice is open, and the people who would pay it do not have a vote on the 22-member board that will name the number.