The government on Monday announced that banks cannot impose any charges on Unified Payments Interface (UPI) transactions of up to Rs 2,000.

No charges can be imposed on such Rs 2,000 payments made through RuPay-powered debit cards either, according to a government gazette notification.

"In exercise of the powers conferred by section 10 A of the Payment and Settlement Systems Act, 2007 (51 of 2007), the Central Government hereby specifies the following electronic modes of payment, namely:– (i) Debit Card powered by RuPay; and (ii) Unified Payments Interface (UPI) transactions upto Rs. 2,000. No bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment by using the electronic modes of payment specified in paragraph above," the Finance Ministry said in an official notification.

The notification said no bank or system provider can impose any direct or indirect charge on a person making or receiving payments through these modes.

The Finance Ministry notified the changes under the Payment and Settlement Systems Act to clarify the rules around charges on UPI transactions.

The notification 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 will not be charged for making payments through the Unified Payments Interface (UPI), while any future merchant discount rate (MDR) will be limited to select transactions above a specified threshold.

The Finance Ministry said that all person-to-person (P2P) UPI transactions will continue to remain free and there will be no blanket MDR on merchants.

"If introduced, MDR charges will apply only to a limited set of merchant transactions above a certain threshold and at a nominal rate," it said.

The government further added that such charges would be significantly lower than the MDR applicable to debit or credit card transactions.

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