UPI P2P Payments Remain Free

The Finance Ministry has clarified that person-to-person (P2P) UPI transactions will continue to be completely free, regardless of the amount transferred.
Under the revised UPI Merchant Discount Rate (MDR) framework, charges will apply only to specified person-to-merchant (P2M) transactions above ₹2,000. Payments to merchants up to ₹2,000 and transactions covered under the zero-MDR framework for small merchants will remain free. As a result, around 96% of P2M transactions are expected to remain unaffected.

The ministry stressed that MDR is not a government tax or fee. It is shared among banks, payment service providers and other participants in the UPI ecosystem to support its operations and expansion.
A nominal 0.4% MDR will apply to eligible merchant transactions above ₹2,000, with a maximum charge of ₹300 for transactions of ₹75,000 or more. Small merchants receiving up to ₹1 lakh per month through UPI QR codes under the P2PM category will continue to enjoy zero MDR.

Certain sectors, including railways, telecom, insurance, fuel and agricultural inputs, will be charged a flat MDR of ₹5 per transaction above ₹2,000.
The ministry also clarified that UPI apps cannot impose platform fees or hidden charges on users. Banks have been advised to ensure that merchants do not recover MDR from customers.
A dedicated fund will also be created to promote UPI adoption among small merchants, with 5% of total MDR collections contributed to the fund.

The government said the new framework aims to ensure the long-term sustainability of UPI while keeping person-to-person payments free and protecting small merchants.