India Amends UPI Laws to Allow Merchant Transaction Fees

The Government of India secured parliamentary approval to amend laws governing the Unified Payments Interface (UPI) to ensure the system's long-term sustainability. While person-to-person transfers will remain free, the government will allow intermediaries to charge fees on specific merchant transactions to fund cybersecurity, fraud prevention, and infrastructure.

One proposed measure includes a merchant discount rate of 0.3% to 0.5% on transactions exceeding 2,000 rupees. The reform follows a 2026 report from the United States Trade Representative, which alleged that UPI creates an uneven playing field for American electronic services suppliers. The report specifically highlighted the competitive disadvantage faced by Visa Inc. and Mastercard Inc. compared to the National Payments Corporation of India's RuPay cards.

Opposition parties have criticized the move, characterizing the legal changes as a surrender of financial sovereignty to the United States.