Under the government's new directive, no charges will apply to UPI payments of up to ₹2,000. This brings relief to customers and small merchants. So, how much would the charge be for a bill payment of ₹2,500?

In its new order, the central government has clearly stated that banks and system providers cannot levy charges on UPI transactions and RuPay debit card payments of up to ₹2,000. This decision by the Ministry of Finance implies that digital transactions up to ₹2,000 will remain completely free for the general public and small shopkeepers. Neither banks nor digital payment companies—such as PhonePe, Google Pay, or Paytm—can collect any charges on payments up to ₹2,000.

Why did the government take this decision?

In terms of volume, micro-payments dominate the landscape in India. People have become heavily reliant on UPI for everyday small expenses, such as payments at tea stalls, vegetable markets, grocery stores, and auto-rickshaw fares. A significant majority of Person-to-Merchant (P2M) transactions are valued at less than ₹2,000. This is why the government has kept transactions up to ₹2,000 free of charge; imposing fees on these could slow down the momentum of the 'Digital India' initiative.

How much will be deducted for a ₹2,500 bill payment?

According to media reports, discussions are underway between the government and banks regarding a proposal to levy a Merchant Discount Rate (MDR) of 0.3% to 0.5% on UPI transactions exceeding ₹2,000 for large businesses with an annual turnover of over ₹1.5 crore. Based on this, how much would the charge amount to for a future bill payment of ₹2,500? At a rate of 0.3%, a total charge of ₹7.50 will be deducted on a bill payment of ₹2,500. However, you will not have to pay any extra money out of your own pocket for this; the full ₹2,500 will be debited from your bank account or UPI app. This ₹7.50 charge will be deducted from the merchant's account. In other words, when the customer makes a payment of ₹2,500, the amount credited to the merchant's bank account—after the charge is deducted—will be ₹2,492.50.