The Centre has notified that no bank or payment system provider may impose any charge, directly or indirectly, on either the payer or the recipient for payments made through RuPay debit cards and UPI transactions up to Rs 2,000, exercising a newly-inserted power under the Payment and Settlement Systems Act.
New Delhi: The Central Government has prohibited banks and system providers from levying any charge, whether directly or indirectly, on persons making or receiving payments through RuPay-powered debit cards and the Unified Payments Interface (UPI) for transactions up to Rs 2,000, formally protecting the vast bulk of everyday digital payments from transaction fees.
The Ministry of Finance, Department of Financial Services, issued the notification, bearing number S.O. 5067(E), on September 14, 2026, in exercise of the powers conferred by Section 10A of the Payment and Settlement Systems Act, 2007.
What the notification covers
The notification specifies two electronic modes of payment: debit cards powered by RuPay, and UPI transactions up to Rs 2,000. In respect of these, it states in unambiguous terms that “no bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment” using the specified modes.
Two features of the prohibition are worth highlighting. First, it protects both sides of a transaction, the person making the payment and the person receiving it, so that neither a customer nor, for instance, a small merchant accepting a UPI payment can be saddled with a fee. Second, and importantly, it expressly extends to charges imposed “indirectly,” a deliberate drafting choice that forecloses attempts by banks or payment providers to recover the same cost through some roundabout or repackaged fee. The ban is thus designed to be difficult to circumvent.
The legal basis: a new Section 10A
The notification derives its authority from Section 10A of the Payment and Settlement Systems Act, 2007, a provision that empowers the Central Government to prescribe electronic modes of payment for which no charges may be imposed on those making or receiving payments. Section 10A is itself a recent addition to the statute: it was inserted through the Taxation and Other Laws Amendment Act passed by Parliament during the 2026 Monsoon Session.
That legislative history is the most interesting part of the story. When the amendment was being debated, it drew considerable attention precisely because, by creating a statutory mechanism to govern charges on electronic payments, it was seen as potentially paving the way for the introduction of charges on UPI in the future, a prospect that had generated public anxiety given how central free UPI has become to daily life in India. The present notification represents the government deploying that very power in the opposite, consumer-protective direction: rather than authorising charges, it uses the new provision to place a statutory bar on them for the specified small-value and RuPay transactions.
Placing the “no charge” guarantee on a statutory footing, rather than leaving it to policy circulars or reimbursement schemes, gives it a firmer legal character. Where earlier the zero-MDR (Merchant Discount Rate) regime on UPI and RuPay had been implemented largely through fiscal and administrative measures, an express statutory prohibition backed by Section 10A creates a clearer, enforceable prohibition on the levy of such charges.
Why it matters
For ordinary users, the practical significance is considerable. UPI has become the default mode of payment for a very large share of small transactions in the country, from street vendors and kirana stores to everyday peer-to-peer transfers, and the Rs 2,000 ceiling captures the overwhelming majority of such payments by volume. By statutorily barring any direct or indirect charge on these, the notification protects the affordability that has driven mass adoption of digital payments, and shields small merchants, for whom even a modest per-transaction fee can be significant, from a fresh cost.
The larger significance lies in the certainty it provides. By anchoring the prohibition in a specific statutory provision and a gazetted notification, the government has converted what had been a policy commitment into an enforceable legal norm, one that, by its own terms, cannot be sidestepped through indirect fees. For a payments ecosystem that the country’s economy now heavily depends upon, that clarity, on who can be charged, for what, and up to what value, is itself the point. The notification takes effect as a binding prohibition on banks and system providers, and any charge levied in contravention would run counter to the express terms of the law.
Notification: S.O. 5067(E), Ministry of Finance (Department of Financial Services), dated September 14, 2026, issued under Section 10A of the Payment and Settlement Systems Act, 2007.