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Centre Notifies Statutory Ban on UPI Charges Up to Rs 2,000 and RuPay Debit Cards
In a significant move that cements the government’s commitment to affordable digital payments, the has issued a formal notification under , prohibiting banks and payment system providers from imposing any charges—direct or indirect—on UPI transactions up to Rs 2,000 and on all RuPay debit card payments. The notification, bearing number and dated , transforms what was earlier a policy-level assurance into a , offering both consumers and merchants a against transaction fees.
The notification explicitly covers two categories of electronic payment modes: Unified Payments Interface (UPI) transactions valued at Rs 2,000 or less, and all transactions made using debit cards powered by the RuPay network. It states in unambiguous terms that “no bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment” using these specified modes. The language is deliberately broad, covering both the payer and the payee, and extends to indirect charges—a precaution against attempts to the ban through rebranded or bundled fees.
Statutory Shield for Small Digital Payments
The practical impact of this notification is enormous. UPI has become the backbone of India’s retail payment ecosystem, processing over 24.5 billion transactions in alone, worth nearly Rs 30 trillion. The vast majority of these are small-value payments—from street vendors, kirana stores, and peer-to-peer transfers—that fall well within the Rs 2,000 threshold. By statutorily barring charges on these transactions, the government has insulated the most vulnerable users—small merchants and low-income consumers—from any cost burden that could have arisen from a future fee regime.
RuPay debit cards, which are deeply integrated with government schemes and financial inclusion initiatives, also receive blanket protection. This ensures that users of Jan Dhan accounts and other subsidized banking products are not subjected to transaction fees that could erode the benefits of financial inclusion.
The notification derives its legal force from —a provision inserted by the passed by Parliament during the . This legislative history is noteworthy. When the amendment was debated, it was seen as a potential enabler for introducing charges on UPI, as it gave the government a statutory mechanism to prescribe which electronic payment modes could attract fees. The present notification deploys that same power in the opposite direction—to prohibit charges—and does so with the full weight of statutory authority, rather than through executive policy or reimbursement schemes.
The Legal Architecture: Section 10A
Section 10A empowers the Central Government to specify electronic payment modes for which no charges may be imposed on persons making or receiving payments. The provision was crafted to provide a clear legal basis for the government to intervene in the fee structure of digital payments, which had previously been governed by informal arrangements and central bank circulars. By using this provision to issue , the has given the a that is harder to challenge or .
The notification’s language is precise: it prohibits “any charge,” not merely a . This means banks, payment system providers, and even intermediaries cannot levy processing fees, convenience fees, or any other on the specified transactions. The prohibition extends to both the payer and the recipient, ensuring that a small merchant accepting a UPI payment cannot be saddled with a fee either directly or through a deduction from the settlement amount.
This level of protection is unprecedented in India’s digital payments landscape. Earlier, the on UPI and RuPay was enforced through administrative measures and reimbursement schemes, but lacked a direct . Now, any bank or system provider that attempts to impose such a charge would be acting in of a under an , exposing them to potential legal action under the Payment and Settlement Systems Act itself, as well as consumer protection laws.
What This Means for Banks and Payment Providers
For banks and payment aggregators, the notification imposes a clear . They must ensure that their systems do not generate any charge, direct or indirect, for UPI transactions up to Rs 2,000 or for RuPay debit card transactions. This includes refraining from embedding charges in , subscription models, or any roundabout mechanism that could be seen as an indirect cost recovery.
The prohibition does not, however, extend to transactions above the Rs 2,000 threshold. The notification is silent on larger UPI payments, leaving the door open for the government to consider a future fee structure—such as a nominal Merchant Discount Rate—for high-value merchant transactions. Indeed, the Finance Ministry had indicated in that it was exploring the possibility of a limited MDR on certain merchant transactions above a prescribed threshold, which would be borne by the merchant rather than the consumer. had estimated that such a fee could generate between Rs 5,000 crore and Rs 10,000 crore annually for the payments industry.
This dual approach—protecting small transactions while leaving larger ones open to a potential fee—reflects a balancing act. The government wants to keep UPI affordable for the masses, especially for small-value transactions that drive financial inclusion, while also ensuring that the payment ecosystem remains financially sustainable as volumes soar. Banks and payment firms have long argued that the cost of processing UPI transactions, particularly those with high volumes and low values, needs some revenue source. The notification resolves this tension for the vast majority of transactions, while keeping the policy discussion alive for the minority of high-value merchant payments.
The Broader MDR Debate
The notification does not address the Merchant Discount Rate directly, but it implicitly shapes the contours of the ongoing debate. MDR is a fee paid by merchants to banks and payment service providers for processing digital payments. Credit card MDRs typically range from 1% to 3%, while debit card MDRs are lower. UPI has historically operated with zero MDR, which has been a key driver of its adoption.
The government’s stance has been that any future MDR on UPI would apply only to larger merchant transactions and would be paid by merchants, not consumers. The present notification reinforces this consumer-protective stance by statutorily banning any of charges to consumers for small-value UPI payments. It also covers RuPay debit cards, which are already subject to a for most transactions under government schemes.
For legal professionals, the notification raises interesting questions about the scope of the prohibition. For example, could a bank impose a monthly maintenance fee on an account that is used exclusively for UPI transactions? Arguably, such a fee would not be a on a specific payment, but if it is designed to recover costs associated with UPI processing, it could be challenged as an . The notification’s inclusion of “indirectly” suggests a broad interpretation, and courts may need to borderline cases.
Implications for Legal Practice
Banking and fintech lawyers will need to advise their clients on compliance with this new statutory regime. Payment system providers must review their fee schedules, terms of service, and to ensure no prohibited charges are being levied. The notification applies to all banks and system providers—including third-party payment apps and payment gateways—so the compliance burden is widespread.
Any dispute over charges on UPI or RuPay transactions will now be grounded in a clear , making it easier for consumers and regulators to take action. The and the are likely to issue circulars aligning their regulatory framework with this notification. Legal practitioners should also watch for potential amendments to the Payment and Settlement Systems Act itself, as the government may further refine the fee structure for larger transactions.
Conclusion
The notification under Section 10A marks a watershed moment for India’s digital payments ecosystem. By placing the zero-charge guarantee for small UPI transactions and RuPay debit cards on a , the government has provided certainty and legal enforceability to what was previously a policy commitment. For millions of Indians who rely on UPI for everyday payments, this means continued affordability and protection from hidden fees. For the payments industry, it means a clear regulatory line—at least for now—with the debate shifting to how larger transactions will be handled in the future.
As UPI continues to grow in volume and importance, the legal framework governing its charges will remain a critical area for financial regulation. This notification is a foundational step, and its implementation will be closely watched by all stakeholders.
