The Lok Sabha has passed an amendment to the Payment and Settlement Systems Act, 2007, giving the government the legal authority to allow banks and payment service providers to levy charges on UPI and other notified digital payment systems. The amendment itself does not introduce a fee, but it creates the legal framework for the government to notify one in the future.
The move has drawn attention because it comes as India and the United States continue negotiations on a bilateral trade agreement. The timing has prompted fresh questions over whether long-standing US concerns about India’s digital payments ecosystem have influenced the policy change.
For several years, the Office of the US Trade Representative (USTR) has argued that India’s digital payments framework gives domestic platforms such as UPI and RuPay an unfair advantage over global payment networks like Visa and Mastercard. In its 2026 National Trade Estimate Report, the USTR described India’s digital payment policies as a trade barrier, citing the zero Merchant Discount Rate (MDR) on UPI and RuPay transactions, government support for domestic payment systems, and policies that it says prevent a level playing field for foreign payment companies.
Following Parliament’s approval of the amendment, the Global Trade Research Initiative (GTRI) argued that India should not redesign its digital payments ecosystem simply to address US trade complaints. It said any future decision to introduce charges on UPI should be based on the actual cost of operating the payments infrastructure and ensuring its long-term sustainability, rather than external trade pressure.
The government has rejected suggestions that the amendment was driven by US demands. Finance Minister Nirmala Sitharaman has clarified that Merchant Discount Rate applies to merchants rather than consumers and said the amendment merely provides the legal authority to notify charges if required. She has also maintained that no final decision has yet been taken on whether, when or where such charges will apply.
The amendment has therefore expanded the debate beyond whether UPI should remain free. It has also raised broader questions about how India balances the sustainability of its digital payments ecosystem with policy autonomy while negotiating trade agreements with major partners.
