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The government did not specify whether charges can be imposed on UPI transactions above Rs 2,000, particularly those paid by merchants.
Ashneer Grover, co-founder of BharatPe, So far, UPI transactions have not attracted a Merchant Discount Rate (MDR), irrespective of the transaction value.
BharatPe co-founder Ashneer Grover on Tuesday criticised the possibility of levying charges on Unified Payments Interface (UPI) transactions, saying any such levy would effectively amount to tax collection. He also questioned the logic behind charging for a payment system that has helped drive India’s digital payments revolution.
Speaking to CNN-News18Grover said introducing charges on UPI could push consumers and merchants back towards cash, eventually increasing the cost of managing cash for banks and businesses.
“Why are you interfering with something that is already working? Why do you have to interfere with everything? Free UPI is the only UPI. If you start charging for UPI, you can say ‘Tata, bye-bye’ to it. It is over,” Grover said.
His comments came after the government notified that banks and payment system providers cannot impose charges, directly or indirectly, on UPI transactions of up to ₹2,000 or on payments made through RuPay debit cards. The notification, however, does not explicitly clarify whether charges could be imposed on UPI transactions above ₹2,000, particularly those made by merchants.
So far, UPI transactions have not attracted a Merchant Discount Rate (MDR), irrespective of the transaction value.
Grover questioned the significance of the ₹2,000 threshold, arguing that transactions above the limit account for a relatively small share of transactions by volume but represent a much larger share of their overall value.
“What is the government saying? That transactions above ₹2,000 account for only 4% of transactions by volume. But in terms of value, those transactions account for 66%. So they have simply found a nice, round number above which they can impose a tax and collect more money from people, over and above existing taxes. There is no logic to it,” he said.
Grover also warned that merchants could pass any potential MDR on to consumers or encourage them to make multiple smaller UPI payments.
“You are trying to justify why only 4% of transactions should be protected. But two-thirds of the value of UPI transactions is where you are going to impose MDR,” he said.
According to Grover, if merchants are eventually allowed to levy charges on larger UPI transactions, customers could be given the choice of either paying the additional fee or using cash.
“A shopkeeper could simply refuse to accept a UPI payment of ₹2,000 and ask you to pay entirely in cash. Then you will go back to using cash. You will need more offices and more ATMs. The number of ATMs will increase, and the cost of operating those ATMs will also increase,” he said.
“Whatever you save, you will end up spending much more in the banking sector on managing cash, and India could become a cash economy again.”
Grover further said consumers could split larger payments into multiple smaller transactions to avoid potential charges.
“If you have to pay ₹12,000, you can keep making payments of ₹6,000 or ₹2,000, sitting there and doing it repeatedly. Or I can tell you that I will charge you whatever the government allows — 0.25%, 0.5% or 1% — and collect that amount from you. Otherwise, pay in cash,” he said.
“It’s a simple shop transaction. What’s so difficult about it? It’s not rocket science.”
Grover also argued that imposing charges on UPI could undermine one of India’s biggest digital-payment success stories.
“Free UPI is the only UPI,” he said. “If you start charging for UPI, you can say ‘Tata, bye-bye’ to it. It is over.”
Grover also highlighted the Reserve Bank of India’s surplus transferred to the government at Rs 2.87 lakh crore, total listed bank profits at Rs 4.11 lakh crore, and NPCI’s pre-tax surplus at Rs 1,888 crore.
“Then whose loss is happening because of UPI and what subsidy is the government giving on UPI that is hurting?” Grover asked.
What Did The Government Say On UPI Charges?
According to a gazette notification dated September 14, no bank or system provider can impose, either directly or indirectly, any charge on a person making or receiving a payment through RuPay debit cards or UPI transactions of up to Rs 2,000.
The notification follows an amendment to Section 10A of the Payment and Settlement Systems Act, 2007. The amendment creates an enabling framework for imposing MDR on UPI and other notified electronic payment modes.
The amendment Bill was passed by Parliament during the Monsoon Session, which concluded on August 13, 2026.
Following the passage of the Bill, the government said the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), would decide the MDR rates.
Why Does The Government Want An MDR Framework?
The government has pointed to the rapid growth in UPI transactions and the need for continued investment in the payment ecosystem.
According to the government, exponential growth in transaction volumes requires significant and continuous upgrades in cybersecurity, fraud prevention and infrastructure.
It has also argued that charges are required to support market expansion and make the UPI ecosystem more self-sustaining. A revenue model, the government said, could encourage more companies to enter and expand in the digital payments sector, thereby increasing competition.
The government has further said that relying solely on subsidies is not viable for the next phase of UPI’s growth and that a balanced framework is needed to keep the system robust, inclusive and future-ready.
What Is UPI And How Big Is It?
UPI is operated by the National Payments Corporation of India (NPCI), an initiative of the Reserve Bank of India and the Indian Banks’ Association.
The real-time payments system allows users to transfer money directly between bank accounts and make payments to merchants.
UPI has also expanded internationally and is now accepted in 11 countries. Uzbekistan is the latest country to join the list.
The other countries where UPI is accepted include Singapore, the United Arab Emirates, France, Mauritius, Nepal, Bhutan, Qatar, Sri Lanka, Cambodia and Greece.
Launched on August 25, 2016, UPI has transformed India’s digital payments landscape. Its transaction value rose from Rs 0.07 lakh crore in FY17 to around Rs 314 lakh crore in FY26 — an increase of more than 4,000 times over the decade.
The debate over MDR now centres on how UPI can remain affordable for users while ensuring that the payment ecosystem has a sustainable revenue model to fund infrastructure, cybersecurity and innovation.
Quick Answers
Ask News18According to a gazette notification dated September 14, 2026, banks and payment system providers are prohibited from imposing any direct or indirect charges on RuPay debit card payments or UPI transactions of up to Rs 2,000. However, the notification does not explicitly clarify whether charges can be levied on UPI transactions exceeding Rs 2,000, particularly those made by merchants.
Ask News18About the Author
Saurabh Verma is a Deputy News Editor at News18.com, specialising in Indian politics and breaking global news. With years of experience tracking election strategies, he decodes domestic issues for mil…Read More
September 15, 2026, 3:27 pm IST
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