PhonePe says UPI payments will remain free for you
What's the story
PhonePe co-founder and CEO Sameer Nigam has clarified that Unified Payments Interface (UPI) payments will continue to be free for consumers. The statement comes amid a debate over the Merchant Discount Rate (MDR) on certain UPI transactions. The proposed levy has raised concerns over potential consumer charges for using UPI, India's most popular digital payments platform.
Industry support
PCI backs Nigam's statement
The Payments Council of India (PCI) has also backed Nigam's statement, asserting that UPI will remain free for consumers and small merchants won't have to pay MDR for accepting UPI payments.
The PCI clarified that any applicable charges would be levied at the merchant end under commercial arrangements with payment service providers, not directly from consumers.
Legislative changes
Proposed MDR on business-directed payments
The current debate revolves around whether an MDR could be levied on certain business-directed electronic payments.
The Taxation and Other Laws (Amendment) Bill, 2026 empowers the government to levy MDR on notified electronic payment modes.
For certain business-directed UPI transactions above ₹2,000, a potential MDR has been suggested at 0.25% to 0.4%.
However, person-to-person payments would not be covered by this proposed levy.
Fee structure
What is Merchant Discount Rate?
MDR is a fee related to accepting digital payments, usually paid by the merchant to transaction processing entities.
For UPI, most transactions have historically been processed without MDR being charged to merchants.
The cost of running the ecosystem has instead been absorbed by banks, payment service providers, and other participants.
Protection measures
Small merchants to remain protected from MDR charges
The PCI has clarified that small merchants and kirana stores will remain protected from MDR charges for accepting UPI payments.
The council stressed that keeping digital payments accessible to small businesses is key to UPI's inclusive growth.
This clarification is especially important as small retailers, local shops, and other small businesses are among the biggest users of UPI for low-value transactions.