Lok Sabha approves bill enabling banks to charge fees on select UPI payments

In a largely uncontroversial vote, the Lok Sabha approved a bill that amends the Payment and Settlement Systems Act, 2007, permitting banks and payment service providers to impose merchant discount rates on electronic transactions. The legislation lifts the existing prohibition on fees for UPI and RuPay debit card payments, and authorises the government to designate which payment modes remain exempt. The proposed framework would apply a fee of 0.25% to 0.4% on UPI payments exceeding Rs 2,000 to merchants, covering only about 5% of transaction counts but nearly two-thirds of the platform’s value.

Everyday low-value purchases are expected to stay fee-free. RBI Governor Sanjay Malhotra described the discussion as premature, noting that the cost of digital payment infrastructure must ultimately be borne by either taxpayers or users. The bill does not set a specific rate but creates the legal basis for future adjustments. Industry observers see this as a potential shift from India’s zero-MDR model toward a user-pays approach.