In the Union Budget 2026-27, the government of india set aside ₹2,000 crore to support UPI (Unified Payments Interdata-face) and RuPay debit card transactions as part of its ongoing effort to promote digital payments nationwide.

This subsidy will be used to compensate banks and payment service providers for offering zero Merchant Discount Rate (MDR) on low-value UPI and RuPay transactions — meaning that merchants do not pay any processing fee when customers use these wallet PLATFORM' target='_blank' title='digital-Latest Updates, Photos, Videos are a click away, CLICK NOW">digital methods.

📌 What the ₹2,000 Crore Allocation Means

· The subsidy allocation of ₹2,000 crore for FY 2026-27 is about 10% lower than the revised estimate of ₹2,196 crore provided last year.

· Despite this reduction, the government has indicated that low-value wallet PLATFORM' target='_blank' title='digital-Latest Updates, Photos, Videos are a click away, CLICK NOW">digital transactions will continue to be free for users and merchants under the current zero-MDR policy.

🧾 Free digital payments to Continue—For Now

According to officials, the budget provision aims to keep UPI and RuPay payments free at the point of sale, supporting the wallet PLATFORM' target='_blank' title='digital-Latest Updates, Photos, Videos are a click away, CLICK NOW">digital payment ecosystem and encouraging wider adoption, especially among small merchants. The scheme mainly covers small transactions (typically below ₹2,000), which make up a large portion of everyday payments using QR codes and app-to-merchant transfers.

💬 Industry Reaction

However, payment industry bodies — including the Payments Council of India — have expressed concern that the ₹2,000 crore subsidy may be insufficient given the rapid growth and scale of wallet PLATFORM' target='_blank' title='digital-Latest Updates, Photos, Videos are a click away, CLICK NOW">digital payments. Some fintech leaders argue that if subsidies do not grow in line with usage, it could strain the digital payments ecosystem and lead to calls for reintroducing a nominal MDR, at least for larger merchants.

📊 Why This Matters

India’s UPI network has become one of the most widely used wallet PLATFORM' target='_blank' title='digital-Latest Updates, Photos, Videos are a click away, CLICK NOW">digital payment systems in the world, handling billions of transactions daily across urban and rural markets. Maintaining it as a free and accessible option has been a key government priority to boost financial inclusion and reduce reliance on cash.

Whether digital payments stay completely free in the long term may depend on future government support, industry negotiations, and how costs are shared across banks, fintech platforms, and merchants. For now, digital payments under ₹2,000 continue to be offered without MDR charges under the 2026 budget framework.

 

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