Everyday users of digital payment systems will not face any additional charges on their digital transfers, Union Finance Minister Nirmala Sitharaman has clarified. Responding to concerns regarding potential levies on digital payments, the minister stated that the proposed Merchant Discount Rate is strictly meant for commercial merchants and business entities. This mechanism aims to assist financial institutions and digital payment providers in upgrading their technical infrastructure, cybersecurity measures, and technological innovations without shifting financial burdens onto the general public.
Legislative Framework and Steering Committee Deliberations
Addressing statements made by Congress leader Jairam Ramesh regarding potential cost increases for retail users, the Finance Minister emphasized that formal decisions regarding payment charges remain pending. The Services Steering Committee, operating under the guidance of NPCI and UPI, has not finalized any framework for Merchant Discount Rate implementation. Any policy adjustment regarding transaction fees will only proceed once Parliament considers and passes the Taxation and Other Laws Amendment Bill 2026.
This legislative measure, introduced in Parliament on Tuesday by Union Finance Minister Nirmala Sitharaman, seeks to modify existing regulations that currently prevent banking institutions and payment service facilitators from levying transaction fees on notified electronic payment methods. Once enacted, the law will empower the government to formally notify specific electronic payment gateways and transaction types that will remain exempt from commercial charges.
Proposed Fee Structure and High Value Transaction Thresholds
Under the proposed framework being evaluated following parliamentary approval, authorities may permit a Merchant Discount Rate ranging between 0.25 percent and 0.40 percent. This charge would apply exclusively to merchant payments exceeding 2,000 rupees. Financial projections indicate that transactions surpassing this threshold account for just 5 percent of the total volume of UPI transactions across the country.
However, despite representing a small fraction of overall transfer counts, transactions above 2,000 rupees constitute approximately 65 percent of the total monetary value processed through the network. Because the threshold is set at 2,000 rupees, routine daily expenditures, including purchases of groceries, milk, vegetables, and local transport fares like auto and taxi charges, fall well below the limit and are unlikely to experience any financial impact.
Digital Payment Growth and Official Statements
The scale of India digital payment ecosystem highlights the significance of robust infrastructure funding. In official statements posted on her social media handle on X, the Finance Minister reiterated that enabling revenue mechanisms for service providers ultimately serves consumer interests by fortifying platform security and transaction stability.
Data highlights the vast reach of the network, with approximately 23.7 billion UPI transactions recorded in July alone. The cumulative financial value of these monthly transfers reached 29.9 lakh crore rupees, underscoring the massive scale at which digital payments operate nationwide.
