THE CENTRAL GOVERNMENT’S new regulations on the Unified Payments Interface (UPI) transactions has been one of the primary points of discussion among political commentators, economic experts and opposition leaders since its introduction in the parliament during the monsoon session last month. The government had repeatedly assured that there would not be any charge levied upon the customers, and that this charge would only include select enterprises or merchants, based on the nature of transactions.
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Later, on September 15, 2026, the National Payments Corporation of India (NPCI) issued a circular, stating the introduction of a 0.4% charge on the merchants for transactions above Rs 2000.
In this light, Ashneer Grover—Entrepreneur and former Managing Director of Bharat Pe—showcased immense opposition to this new set of regulations, citing it as a measure that could kill the architecture of mobile payments in the country.
The Government introduced an amendment bill in the parliament during the monsoon session (July-August), to bring about certain changes in the Section 10 A of the Payment and Settlement Systems Act, 2007. The Amendment bill proposed a framework to levy a Merchant Discount Rate (MDR) on payments made through UPI and other notified electronic modes of payment.
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Later, the government issued a circular on September 15, 2026, detailing the entire chart of new charges and transaction rules. It is this circular that has come to face the massive heat from those opposing the rules.
The criticisms surrounding the new UPI regulations have not only limited itself to the realm of Indian parliament. Entrepreneur and former Managing Director of Bharat Pe—Ashneer Grover—criticized the new regulations as a ‘regressive step’ that could kill mobile payments in India. As early as August 7, 2026, Ashneer took to X, and stated, “Any MDR on UPI - will kill the one thing in India which is working like clock work i.e. mobile payments. It’s a regressive step - government should reconsider.” Adding more fuel, Ashneer made some explosive comments in Times Now’s debate show on September 15, 2026. “If I transfer Rs 1000 to a friend, or Rs 1 lakh, or pay Rs 3000 using a QR code, what is the cost of running this system? The cost is the same. So, if I am sending Rs 1 lakh to my friend, it would have no charges. But, if I am paying a small shopkeeper Rs 2500, it would incur charges. What’s the logic here?,” Ashneer stated.
When questioned on the point of increasing government expenditure on managing these payment systems, Ashneer clearly stated that the government is not making any additional expenditures. “Now let's come to the aspect of government expenditure. Tell me where is the expenditure exactly? I will state the numbers to you. The Reserve Bank of India (RBI) had given the government a surplus of Rs 3 lakh crore in FY 26. This means that the RBI has said to the government that we have extra Rs 3 lakh crore, please take it and use it. Now let’s come to the NPCI. The pre-tax profit of NPCI for FY 26 is Rs 1900 crore. So if nobody is incurring a loss, why are you asking the small shopkeepers to compensate?” said Ashneer.
Ashneer further debunked the new UPI transaction rules by stating that the government is already making a lot of money from different institutions. “The government is taking money from the RBI, from the banks’ profits and is also charging tax on the NPCI’s earnings. The most interesting thing is that NPCI is not even a government organization. It is a not-for-profit organization. They don’t even write profit in their annual statements. The government has taken Rs 1000 crore tax from NPCI. All these data are available on google and it just takes few minutes to know all these.”
The Government introduced an amendment bill in the parliament during the monsoon session (July-August), to bring about certain changes in the Section 10 A of the Payment and Settlement Systems Act, 2007. Section 10 A of the given act prohibits the banks and other payment operators to impose direct or indirect charges on payment transactions. The Amendment bill proposed a framework to levy a Merchant Discount Rate (MDR) on payments made through UPI and other notified electronic modes of payment.
In a gazette notification dated September 14, 2026, the government directed the banks and other payment system providers to not levy any charge on the UPI transactions of up to Rs 2000 or on payments made through RuPay debit cards. However, it did not mention any charges to be imposed in case of transactions above Rs 2000. This ambiguity was clarified with the NPCI’s circular on September 15.
The circular states that the merchants will now have to pay the banks and payment processors on UPI payments they receive in excess of Rs 2000 per transaction, applicable from October 15, 2026. This charge—Merchant Discount Rate (MDR)—however, is not applicable to person-to-person UPI transactions or the UPI transactions made to small vendors. Along with that, all person-to-merchant transactions up to Rs 2000 done through UPI or RuPay debit cards are also exempted. The Circular noted that transactions over Rs 2000 will have a flat MDR of Rs 5 in case of some select sectors, such as Railway, telecom, insurance fuel and agricultural inputs.
The Ministry of Finance also issued a circular affirming these new sets of regulations. It stated that small merchants receiving payments of up to Rs 1 lakh per month via UPI QR codes under the Person-to-Merchant category will not pay any MDR. Certain essential sectors such as the railways, telecom, insurance, fuel, and agricultural inputs will incur an MDR of Rs 5 per transaction above Rs 2000. “This flat-rate model ensures cost stability in critical public services and thin-margin industries," the Ministry said in its statement. Additionally, payments towards ‘mutual funds, securities, stock brokers and dealers’ will also incur an MDR of 0.02%, set to Rs 300.
The government has announced that it would use this charged MDR as a means to promote UPI usage among small merchants. It stated in the circular that, of the total MDR collections, 5% would be used as a fund to promote UPI usage.
However, there has been an ongoing stir over the viability of these new rules to be beneficial for people of this country. Speaking at the Newshour debate on Times Now, Anand Ranganathan—professor at Special Centre for Molecular Medicine, Jawaharlal Nehru University—supported the new UPI regulations and criticized the opposition parties for causing an unnecessary stir.
Ranganathan said, “96 % of all UPI transactions happen under Rs 2000. So, we are only talking about 4 % of all transactions. The Second point is that, the banks and entire UPI ecosystem spends Rs 23,000 crore every year in the upkeep of the UPI system. The government spends Rs 1970 crores in the upkeep of the UPI system.” Therefore, a small charge on the transactions above Rs 2000, which is only 4% of the total UPI transactions, would help to balance out the financial equations between the banks, government and financial institutions.
Taking to the social media platform X, Rahul Gandhi, directly criticized the BJP government for surrendering to American pressure on digital payments. “The Modi government has quietly opened the door to imposing fees on UPI. Now, MDR can be levied on Merchant UPI transactions above Rs 2000. Even if these account for just 5%, they make nearly 65% of UPI’s total transaction value. American payment companies have long opposed India’s zero-MDR policy. Now, the Modi government has opened the path to changing the policy in exactly that direction,” wrote Rahul Gandhi in the post in Hindi.
On a similar note, John Brittas—leader Communist Party of India (Marxist) and member of the Rajya Sabha—had been one of the first individuals to oppose this amendment bill. He had opposed the amendment bill when it was tabled in the upper house by Nirmala Sitharaman, citing concerns over the potential consumer burden. Taking to X, Brittas wrote, “ Just as warned in the Rajya Sabha, the Central Government has decided to impose an additional burden on UPI users. When warnings were issued back then, the government took the stand that no such decision had been made. Not only that, they argued that citizens would not face any kind of burden. However, bypassing our opposition, the law was passed in Parliament, and within a month, the Central Government's true colors were revealed.”
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