Razorpay CEO Harshil Mathur has joined PhonePe chief Sameer Nigam in backing free UPI payments for consumers, seeking to ease concerns that users could eventually face charges following the passage of a new bill that gives the government a route to reintroduce merchant discount rates (MDR) on certain digital transactions.
The debate gained momentum after the Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026. The legislation amends provisions across three laws and allows the government to prescribe an MDR on select electronic payment modes. The move immediately triggered questions about whether the cost of processing UPI transactions could eventually reach consumers.
Mathur, however, drew a clear distinction between consumer access and the commercial arrangements that support the digital payments ecosystem. In a post on X, he said the basic principle should remain simple: consumers should not have to pay to use UPI, small merchants should remain protected, and the wider ecosystem must have a sustainable financial model.
“The principle is simple: Free for consumers. Protected for small merchants. Sustainable for the ecosystem,” Mathur said.
The Razorpay co-founder also argued that India’s digital payments infrastructure needs a sustainable model to keep improving. According to him, continued investment remains essential for reliability, security and innovation.
Mathur’s comments came after PhonePe founder and CEO Sameer Nigam also assured users that UPI payments would remain free. Nigam said consumers would not be charged for making UPI payments through the platform, addressing concerns that the proposed changes could lead to a new cost for everyday digital transactions.
The statements from the two major fintech executives come at a time when UPI has become one of India’s most widely used payment systems. Millions of consumers rely on it for everything from small retail purchases and food deliveries to utility bills, online shopping and person-to-person transfers.
That widespread use has also made the question of who should bear the cost of maintaining the UPI ecosystem increasingly important.
The Payments Council of India has said that consumers will continue to use UPI without paying transaction charges. The industry body has also clarified that small merchants will not have to bear MDR charges for accepting UPI payments under the current framework.
The distinction between a merchant-facing charge and a consumer fee is central to the ongoing debate. Merchant service charges, where applicable, can form part of commercial arrangements between merchants and payment service providers. Such arrangements do not automatically mean that consumers will have to pay a separate fee every time they make a UPI payment.
The Centre also runs an incentive mechanism under which banks receive compensation for eligible low-value UPI transactions involving small merchants. The scheme helps cover part of the cost associated with processing these payments and has played a role in supporting the expansion of digital payments across the country.
The latest controversy stems from the provisions of the Taxation and Other Laws (Amendment) Bill, 2026, introduced by Union Finance Minister Nirmala Sitharaman. The Lok Sabha passed the legislation by voice vote.
The bill amends the Payment and Settlement Systems Act, 2007, along with provisions of the Income-tax Act, 2025, and the Finance Act, 2026. One of the most closely watched provisions creates a framework that could allow the government to levy MDR on certain electronic payment transactions.
Market estimates have pointed to a possible MDR in the range of 0.25% to 0.4% for some business-directed UPI transactions above ₹2,000. However, the proposed framework does not mean that every UPI transaction will suddenly attract a fee.
Person-to-person payments remain outside the proposed charge structure, according to the government. The focus instead falls on specific business-related transactions and the commercial arrangements surrounding digital payments.
For consumers, that distinction is significant. A person sending money to a friend, transferring funds to a family member or making other eligible person-to-person payments should not interpret the MDR provision as the introduction of a blanket UPI transaction fee.
The bigger question concerns the long-term economics of India’s UPI infrastructure.
UPI has grown rapidly because consumers have been able to make payments without directly facing transaction fees in most everyday situations. At the same time, banks, payment companies and technology providers incur costs to operate the infrastructure, maintain security systems, prevent fraud and ensure that transactions work reliably at enormous scale.
Mathur’s comments highlight that tension. Keeping UPI free for consumers has helped drive adoption, but the ecosystem also needs sufficient financial support to fund technology, security and infrastructure.
The challenge for policymakers, therefore, is to find a model that preserves the affordability and simplicity that made UPI successful while ensuring that the companies and financial institutions supporting the system can continue investing in it.
For small businesses, the issue carries another layer of importance. Additional payment costs could affect merchants operating on thin margins, particularly small retailers and local businesses that increasingly depend on digital payments.
That is why industry representatives have emphasized protection for small merchants alongside continued free access for consumers.
The latest statements from Mathur and Nigam also indicate that the fintech industry wants to prevent uncertainty from damaging public confidence in UPI. Any widespread perception that consumers will have to pay for routine UPI transactions could influence how people use digital payments.
For now, the message from the industry’s leading payment platforms remains consistent: consumers should not be charged for using UPI.
At the same time, the passage of the new legislation has reopened a broader conversation about how India should finance the digital infrastructure behind its cashless economy. The debate is no longer simply about whether UPI should be free. It is increasingly about who should fund the system, how small merchants can be protected and how India can maintain one of the world’s largest digital payment networks without compromising its affordability for consumers.
The coming policy decisions on MDR will therefore be closely watched by banks, fintech companies, merchants and millions of UPI users. The immediate reassurance is that consumers are not being asked to pay for UPI transactions. The longer-term challenge will be ensuring that the system remains financially sustainable while preserving the feature that helped make UPI a mass-market success: simple and accessible digital payments.