The government announced on Monday that banks cannot charge customers for Unified Payments Interface (UPI) transactions of up to Rs 2,000.

The government also barred banks from imposing charges on payments of up to Rs 2,000 made through RuPay-powered debit cards, according to a gazette notification.

The Finance Ministry issued the notification under Section 10A of the Payment and Settlement Systems Act, 2007. It specified RuPay-powered debit cards and UPI transactions of up to Rs 2,000 as electronic modes of payment and prohibited banks and system providers from imposing any direct or indirect charges on people making or receiving payments through these modes.

The notification aims to clarify the rules governing charges on UPI transactions. It specifically categorised RuPay-powered debit cards and UPI transactions of up to Rs 2,000 as “electronic modes of payment.”

Last month, the government clarified that consumers would not have to pay charges for making payments through UPI. It also said any future merchant discount rate (MDR) would apply only to select merchant transactions above a specified threshold.

The Finance Ministry said all person-to-person (P2P) UPI transactions would remain free and that the government would not impose a blanket MDR on merchants.

The ministry added that, if introduced, MDR charges would apply only to a limited set of merchant transactions above a certain threshold and at a nominal rate.

The government also said such charges would remain significantly lower than the MDR applicable to debit and credit card transactions.

The clarification follows a debate over a recent amendment to the Payment and Settlement Systems Act, 2007, with concerns about the possibility of charges being imposed on UPI users.