Finance Ministry Prohibits Bank Charges on UPI and RuPay Transactions Up to Rs 2,000

Gist The Ministry of Finance has formally notified that banks and payment system providers cannot levy charges on UPI and RuPay debit card transactions up to Rs 2,000 . This notification clarifies a recent statutory amendment by preserving free digital transactions for retail users while enabling the reintroduction of a Merchant Discount Rate MDR on high-value person-to-merchant P2M payments. For civil services aspirants, this highlights a critical policy transition from a purely state-subsidized digital public infrastructure to a self-sustaining commercial model that shifts costs to large merchants. Background Since January 2020 , a zero-MDR regime was mandated for all UPI and RuPay debit card transactions to promote digital payment adoption across India. Under Section 10A of the Payment and Settlement Systems Act, 2007 , banks were legally prohibited from levying charges on electronic modes prescribed under Section 269SU of the Income Tax Act, 1961 . Instead of charging merchants, banks and payment providers relied on the government's incentive scheme for promotion of RuPay debit cards and low-value BHIM-UPI transactions P2M to partially recover infrastructure costs. The recent passage of the…