Government caps zero-fee protection on UPI transactions at ₹2,000
India's government limits free UPI and RuPay debit card transactions to ₹2,000. Banks may now charge fees on larger digital payments.
The government has capped zero merchant discount rate protection at ₹2,000 for UPI and RuPay debit card transactions, clearing the way for banks to levy fees on larger digital payments.
A gazette notification issued under the Payment and Settlement Act, 2007, specifies that no bank or system provider may impose any direct or indirect charge on payments made or received through UPI or RuPay-powered debit cards up to ₹2,000. The notification designates these two modes as protected electronic payment instruments.
Larger transactions no longer shielded
The amendment alters an earlier provision that had barred banks from charging fees on digital payments via UPI across all transaction sizes, effectively removing the protection for transfers above the ₹2,000 threshold. However, a final decision on whether charges will actually be introduced on higher-value UPI payments, and the structure of any such fees, has not yet been taken.
The changes were notified on September 14, 2026.
Source: The Hindu
Frequently asked questions
What is the new cap on zero-fee UPI transactions?
The government has capped zero merchant discount rate protection at ₹2,000 for UPI transactions. Banks cannot levy fees on UPI payments up to this amount, but larger transactions are no longer automatically protected from charges.
Which payment modes are covered by the zero-fee protection?
UPI and RuPay-powered debit cards are designated as protected electronic payment instruments under the ₹2,000 zero-fee cap. No bank or system provider may impose direct or indirect charges on these payment modes up to this threshold.
Will banks definitely charge fees on UPI transactions above ₹2,000?
No final decision has yet been taken on whether charges will actually be introduced on higher-value UPI payments or what the structure of any such fees would be. The ₹2,000 cap simply removes the blanket protection for larger transactions.
When did this change take effect?
The government notified the changes on September 14, 2026, through a gazette notification issued under the Payment and Settlement Act, 2007.
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