Why did the completely free UPI system come to an end after six years? Find out the cost breakdown..

In January 2020, the government implemented a 'Zero MDR' policy to promote digital payments across the country. At that time, UPI was expanding, and the network was operated free of cost through government-funded incentives provided to banks and payment apps. Subsequently, in August 2026, UPI recorded a total of 2,451 crore transactions, amounting to a record value of ₹29.9 lakh crore.

For the 2026-27 fiscal year, the government had made a budgetary provision of ₹2,000 crore for UPI incentives. However, estimates by the National Payments Corporation of India (NPCI) and the industry indicated that the annual cost of maintaining the cybersecurity, server capacity, and infrastructure for this massive, round-the-clock network had reached ₹20,000 crore. Consequently, sustaining a ₹20,000-crore network solely through government subsidies was no longer viable in the long run.

**What are the charges, and who will be affected? ****

Payments up to ₹2,000 will remain completely free. Person-to-Person (P2P) transfers—such as sending money to friends or family—will continue to be 100% free. Merchant payments (P2M) exceeding ₹2,000 will attract an MDR of 0.4%. A payment of ₹5,000 will incur an MDR charge of ₹20, while a payment of ₹50,000 will attract a charge of ₹200. A maximum cap of ₹300 has been set for payments exceeding ₹75,000.

**Special relief for essential services and capital markets**

The government has kept MDR rates extremely low and capped for services of public importance. A flat fee of just ₹5 will apply to transactions exceeding ₹2,000 in sectors such as railways, fuel, telecommunications, and insurance. Meanwhile, a nominal fee of just 0.02% has been set for payments related to capital markets, such as stock market and mutual fund transactions.

This policy shift serves as a means to generate funds for the secure and uninterrupted long-term operation of the UPI network, ensuring that everyday small-value payments made by ordinary citizens remain completely secure and free of charge.

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