New Delhi [India], September 15 (ANI): In a major policy announcement aimed at safeguarding everyday digital transactions, the government has clarified that all Person-to-Person (P2P) UPI transfers will remain entirely free of charges, without any restrictions on payment amounts, according to the Ministry of Finance press release.
Under a newly structured framework introduced under the Payment and Settlement Systems Act, 2007, approximately 96% of Person-to-Merchant (P2M) transactions will also stay free, ensuring that individuals, small vendors, and micro-enterprises face zero payment friction.
Good news for users, as your daily UPI habits won't cost you anything extra. Sending money to friends and family? It stays 100% free. All person-to-person (P2P) transfers will continue to have zero fees, no matter how big the amount — with no transaction, platform or hidden charges from UPI apps or banks.
Shopping at your local stores? Everyday merchant payments up to ₹2,000 also remain free. Neither customers nor shopkeepers will have to pay any Merchant Discount Rate (MDR) on these transactions.
And there is relief for small sellers too. Street vendors and neighbourhood kirana stores that receive up to ₹1 lakh a month through P2PM QR codes will continue to enjoy a zero-MDR shield.
According to the framework, notified by the Central Government on September 14 and followed by an NPCI circular on September 15, P2P transactions will attract no charges. Such transactions account for 37 per cent of UPI transactions by volume and 70 per cent by value.
For P2M transactions above Rs 2,000, an MDR of 0.4 per cent will be levied and shared among payment ecosystem partners, including banks and app providers. For transactions of Rs 75,000 and above, the MDR will be capped at Rs 300 per transaction.
Certain essential sectors, including railways, telecom, insurance, fuel and agriculture inputs, will instead attract a flat MDR of Rs 5 per transaction for payments above Rs 2,000. These categories account for nearly 17 per cent of UPI P2M transaction volume and around 46 per cent of merchant transaction value, the government said.
Payments for mutual funds, securities, stock brokers and dealers will attract a lower MDR of 0.02 per cent, capped at Rs 300 per transaction.
The framework also retains zero MDR for small vendors classified under the Person-to-Person-Merchant (P2PM) framework. Merchants receiving up to Rs 1 lakh per month through UPI QR codes under this classification will continue to be exempt from MDR on all transactions.
The government said UPI app providers will not be permitted to levy platform fees or hidden charges, while banks have been advised to ensure merchants do not pass MDR costs on to customers.
The government said only 4 per cent of merchant transactions are expected to be impacted by the new MDR framework, with the majority either below the Rs 2,000 threshold or covered under the zero-MDR P2PM framework.
A dedicated fund, with 5 per cent of total MDR collections, will also be established to promote UPI adoption among small merchants and support expansion in rural and semi-urban areas. (ANI)
Zero charges on person-to-person transactions: New UPI rules keep all P2P payments 100% free regardless of amount
