# India’s UPI Growth and Merchant Fee Debate > Live situation record from CLSTR: https://clstr.news/situations/indias-upi-dominance-in-digital-payments > Updated: 2026-08-27T10:51:34.000Z. Sources: 125. Developments: 26. India’s Unified Payments Interface (UPI) continues to process tens of billions of transactions each month, with July 2026 recording about 23.6-23.7 billion transactions worth roughly ₹29.9 trillion. The system now permits RuPay credit-card linkage for QR-code purchases up to ₹1 lakh, while person-to-person transfers and cash withdrawals remain excluded. On 3 August 2026, Finance Minister Nirmala Sitharaman introduced the Taxation and Other Laws (Amendment) Bill, 2026, to Parliament. The bill amends the Payment and Settlement Systems Act to grant the central government authority to notify which electronic payment modes remain exempt from Merchant Discount Rate (MDR) charges, potentially reintroducing fees on UPI. By 10 August 2026, Parliament passed the legislation. During Rajya Sabha proceedings, Sitharaman reiterated that the bill is an “enabling provision” and does not currently impose charges on users. The government emphasized that person-to-person (P2P) transfers will remain free and that any future MDR would target specific high-value merchant categories. By late August 2026, the debate has focused on economic sustainability and implementation challenges. The Parliamentary Standing Committee on Finance noted that current government incentives of ₹2,000 crore cover only about 11% of the industry’s estimated ₹20,700 crore operational costs, warning that insufficient funding could jeopardize cybersecurity and infrastructure. Additionally, the Micro, Small and Medium Enterprises Development (Amendment) Bill 2026 was passed to address structural rigidity and payment recovery delays for MSMEs. Industry experts, including CARD91 CEO Ajay Pandey, have noted that any selective MDR framework will require “robust merchant intelligence” and accurate business data to ensure consistent policy application and prevent disputes. ## Claims - UPI processed 2,366 crore transactions totaling Rs 29.9 lakh crore in July 2026. (disputed by 15 sources) - If a Merchant Discount Rate (MDR) is introduced, it will apply only to a limited category of merchant transactions above a specific threshold. (corroborated by 22 sources) - Person-to-person (P2P) UPI transactions will remain free of charge for all users. (corroborated by 20 sources) - Any future MDR for UPI will be significantly lower than rates charged for debit or credit card transactions. (corroborated by 20 sources) - The NPCI-headed UPI and Services Steering Committee will decide on the implementation of MDR once the Taxation and Other Laws (Amendment) Bill, 2026, passes Parliament. (corroborated by 19 sources) - Finance Minister Nirmala Sitharaman stated that any Merchant Discount Rate (MDR) would apply only to merchants and not to customers. (corroborated by 15 sources) - The proposed amendment to the Payment and Settlement Systems Act is intended to ensure the long-term sustainability, cybersecurity, and technical resilience of the UPI ecosystem. (corroborated by 15 sources) - The government rejected claims that external influences were driving the proposed policy changes, calling them unfounded and misleading. (corroborated by 12 sources) - The Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026, by voice vote on 6 August 2026. (corroborated by 10 sources) - Congress leader Jairam Ramesh alleged the amendment removes the statutory guarantee of free UPI transactions and could lead to charges on users. (corroborated by 8 sources) ## Timeline ### 2026-08-27: NPCI introduces new UPI transaction limits and security features The NPCI is implementing new UPI transaction limits for specific merchant categories by 2026, while new legislation creates a framework for potential targeted merchant fees to support digital infrastructure. 3 sources. https://clstr.news/cluster/npci-introduces-new-upi-transaction-limits-and-security-features ### 2026-08-22: India passes legislative amendments for MSMEs and digital payments India has passed legislative amendments affecting MSME regulations and the digital payment landscape, including potential changes to the Zero-MDR regime for UPI transactions. 2 sources. https://clstr.news/cluster/india-passes-legislative-amendments-for-msmes-and-digital-payments ### 2026-08-21: India UPI MDR debate reopens following new taxation amendment bill The Taxation and Other Laws (Amendment) Bill, 2026 allows for potential changes to India's zero-MDR structure for UPI, though no immediate charges for consumers or small merchants have been introduced. 4 sources. https://clstr.news/cluster/india-upi-mdr-debate-reopens-following-new-taxation-amendment-bill ### 2026-08-12: India evaluates sustainability measures for UPI digital payment ecosystem India is considering restoring merchant discount rates or implementing tiered incentives to ensure the long-term financial sustainability of the Unified Payments Interface (UPI) ecosystem. 4 sources. https://clstr.news/cluster/india-evaluates-sustainability-measures-for-upi-digital-payment-ecosystem ### 2026-08-10: India Parliament passes bill enabling potential UPI merchant fees India's Parliament passed a bill enabling potential merchant fees on certain UPI transactions, though Finance Minister Sitharaman confirmed consumers and small merchants will remain exempt from charges. 15 sources. https://clstr.news/cluster/india-introduces-bill-to-amend-mining-and-mineral-regulations ### 2026-08-08: UPI transactions to remain free for citizens, says Indian government The Indian government clarified that UPI transactions will remain free for citizens, with P2P transfers staying free. A nominal Merchant Discount Rate may eventually apply to select large merchant transactions. 35 sources. https://clstr.news/cluster/india-government-clarifies-upi-will-remain-free-for-users ### 2026-08-06: India passes bill allowing potential UPI Merchant Discount Rate charges India's Lok Sabha passed a bill allowing the government to permit MDR charges on digital payments like UPI. Officials clarify that any fees would apply to merchants, not consumers, to fund infrastructure. 39 sources. https://clstr.news/cluster/indias-finance-minister-nirmala-sitharaman-pushes-upi-fee-legislation ### 2026-08-03: India to reintroduce merchant fees on high‑value UPI payments India's Finance Minister tabled a bill to amend the Payment and Settlement Systems Act, allowing a merchant discount rate of 0.25‑0.5% on UPI payments above ₹2,000 for large merchants; the change could affect 5 21 sources. https://clstr.news/cluster/india-moves-to-reintroduce-merchant-fees-on-upi-digital-payments ### 2026-07-29: India expands credit‑card use through UPI linking and bill payments India’s RuPay cards can be linked to UPI for merchant purchases, and credit‑card bills can be paid via UPI apps using BBPS or direct VPAs, with instant settlement and typical limits of ₹1 Lakh. 2 sources. https://clstr.news/cluster/india-expands-creditcard-use-through-upi-linking-and-bill-payments ### 2026-07-23: India rolls out digital customer ID system as payment firms resist one‑click UPI checkout India will launch a common digital ID for banks, insurers and later fund managers, while payments firms protest a one‑click UPI checkout that could boost big‑app dominance. 5 sources. https://clstr.news/cluster/india-rolls-out-digital-customer-id-system-as-payment-firms-resist-oneclick-upi-checkout ### 2026-07-21: India's UPI expands offline tap‑to‑pay feature as user base reaches 55.5 crore NPCI will roll out an offline UPI tap‑to‑pay feature by 2026, enabling NFC payments in no‑network zones, as UPI’s user base hits 55.5 crore and FY 25‑26 transaction value reaches 314 lakh crore. 2 sources. https://clstr.news/cluster/indias-upi-expands-offline-taptopay-feature-as-user-base-reaches-555-crore ### 2026-07-16: India's UPI gains global traction as rewards drive expansion into new markets India’s Pop app adds rewards to its UPI service to stand out domestically, while the UPI system expands to multiple countries with new settlement partnerships, highlighting India’s growing fintech export. 2 sources. https://clstr.news/cluster/indias-upi-gains-global-traction-as-rewards-drive-expansion-into-new-markets ### 2026-07-09: India expands digital payments with AI‑enabled UPI and frictionless card checkout Cashfree launches tap‑and‑pay card checkout with OTP‑free passkeys, while NPCI drafts an AI‑agent protocol for automated UPI transactions in India. 2 sources. https://clstr.news/cluster/india-expands-digital-payments-with-aienabled-upi-and-frictionless-card-checkout ### 2026-07-08: India advances digital payments while urging US trade pact to drive growth India's digital payments summit emphasized security and AI, while economist Surjit Bhalla urged a US trade pact to boost growth and warn China benefits from delays. 3 sources. https://clstr.news/cluster/india-advances-digital-payments-while-urging-us-trade-pact-to-drive-growth ### 2026-07-08: India's Digital Economy Touted as Pillar for Future Economic and Social Progress Indian experts say the digital economy, led by UPI and digital payments, is key to the country's future growth, urging stronger security, cross‑border standards and AI fraud detection. 3 sources. https://clstr.news/cluster/indias-digital-economy-touted-as-pillar-for-future-economic-and-social-progress ### 2026-06-30: India's UPI digital payment system goes live in Greece India's UPI service launches in Greece via an Eurobank‑NIPL partnership, offering low‑cost instant transfers and expanding the digital‑payment ecosystem abroad. 2 sources. https://clstr.news/cluster/indias-upi-digital-payment-system-goes-live-in-greece ### 2026-06-27: India's UPI platform records massive growth as AI is positioned for next phase UPI transactions in India surged to over 24,000 crore, daily volumes exceed 750 million, and NPCI plans to leverage AI for user growth, fraud prevention and credit, amid market‑share caps. 4 sources. https://clstr.news/cluster/indias-upi-platform-records-massive-growth-as-ai-is-positioned-for-next-phase ### 2026-06-26: India's UPI transactions surge to over 24,162 crore in FY 2025‑26 UPI transactions in India rose from 2 crore in FY 2016‑17 to over 24,162 crore in FY 2025‑26, driven by Jan Dhan, Aadhaar, mobile uptake, DBT, DigiLocker and GeM expansion. 3 sources. https://clstr.news/cluster/indias-upi-transactions-surge-to-over-24162-crore-in-fy-202526 ### 2026-06-16: India's UPI payment system goes live at Nice's Galeries Lafayette India's UPI digital payments platform was launched at Nice's Galeries Lafayette, expanding its presence in France and deepening India‑France economic ties. 2 sources. https://clstr.news/cluster/indias-upi-payment-system-goes-live-at-nices-galeries-lafayette ### 2026-06-13: India's UPI system eyed as model for South Africa's cashless push South Africa may adopt India's UPI to accelerate its cash‑less agenda, despite banking, internet and power challenges, as the system already operates in several countries. 2 sources. https://clstr.news/cluster/indias-upi-system-eyed-as-model-for-south-africas-cashless-push ### 2026-06-11: India's UPI Expands to Nepal and Singapore, Enabling Real-Time Cross-Border Payments India and Nepal have launched a direct UPI‑NPI link for real‑time mobile transfers, while Singapore’s Red Dot Payment now offers UPI to merchants, expanding the Indian payment system across the region. 2 sources. https://clstr.news/cluster/indias-upi-expands-to-nepal-and-singapore-enabling-real-time-cross-border-payments ### 2026-06-04: India's Digital India strategy drives $200 bn export growth India's Digital India programme boosted internet penetration, introduced UPI and expanded ICT talent, driving digital‑service exports to about $200 bn annually and reshaping welfare delivery under PM Modi. 4 sources. https://clstr.news/cluster/indias-digital-india-drive-fuels-200-bn-export-growth-and-direct-welfare-delivery ### 2026-06-04: India's UPI to be accepted at 4.5 million Cambodian merchants India’s NPCI partners with Cambodia’s ACLEDA Bank to enable UPI payments at over 4.5 million Cambodian merchants, with reciprocal payments planned later. 2 sources. https://clstr.news/cluster/indias-upi-system-enabled-for-payments-across-45-million-cambodian-merchants ### 2026-06-01: India's UPI hits record 23.2 billion transactions in May 2026 UPI processed a record 23.2 billion transactions in May 2026, up 24 % YoY, valued at 29.90 lakh crore rupees, reflecting rapid growth of India's digital payments. 2 sources. https://clstr.news/cluster/indias-upi-hits-record-232-billion-transactions-in-may-2026 ### 2026-05-28: India's UPI reaches 200 bn transactions as growth eases, PhonePe dominates market India’s UPI crossed 200 bn transactions in FY 2025‑26, with growth slowing to 30%; PhonePe led April 2026 with a 47% market share, while overall volume fell slightly month‑on‑month but rose 25% YoY. 3 sources. https://clstr.news/cluster/indias-upi-reaches-200-bn-transactions-as-growth-eases-phonepe-dominates-market ### 2026-05-19: India's UPI handles 85% of payment volume as RTGS leads high‑value transfers, RBI reports RBI report finds UPI handles 85.5% of payment volume, RTGS leads high‑value transfers, and digital payments in India have surged. 2 sources. https://clstr.news/cluster/indias-upi-handles-85-of-payment-volume-as-rtgs-leads-highvalue-transfers-rbi-reports --- Cite as: India’s UPI Growth and Merchant Fee Debate. CLSTR, https://clstr.news/situations/indias-upi-dominance-in-digital-payments