After weeks of speculation over the possible return of Merchant Discount Rate (MDR) on UPI, the government has notified UPI transactions up to ₹2,000 as a protected electronic mode of payment, ensuring they remain free of charges.

In a gazette notification dated September 14, the Finance Ministry directed banks and system providers not to impose any direct or indirect charge on UPI transactions and RuPay-powered debit card payments up to ₹2,000. The notification was issued under Section 10A of the Payment and Settlement Systems Act, 2007.

The move follows last month's amendment to the PSSA, which gave the Centre flexibility to decide which electronic payment modes remain exempt from charges — this notification now draws that exemption line explicitly at ₹2,000.

Crucially, the notification doesn't confirm charges above that threshold; UPI remains completely free for all person-to-person transactions regardless of amount. Any future MDR would apply only to a limited set of merchant transactions above ₹2,000, at a nominal rate — reportedly being considered around 0.3–0.5%.

The UPI and Services Steering Committee, headed by NPCI, will now determine the specific MDR framework and applicable rates, should one be introduced for high-value merchant transactions.

The government has framed the move as necessary for building a sustainable revenue model, citing rising infrastructure, cybersecurity, and fraud-prevention costs as UPI transaction volumes continue to surge nationwide.