UPSC Prelims Practice Questions — Why are users worried about UPI charges?

Q1. In the context of India's digital payments, the regime made operative from 1 January 2020 in respect of RuPay debit cards and BHIM-UPI meant which one of the following?

  • A. Banks and system providers were barred from imposing any charge on transactions made through these two payment modes
  • B. Goods and Services Tax payable on the merchant service fee for these two payment modes was waived by the Central Government
  • C. The merchant fee on these two payment modes was capped at 0.4 per cent for businesses with annual turnover below fifty crore rupees
  • D. Holders of savings bank accounts were exempted from charges on their first fifty electronic fund transfers in a month

Q2. The incentive scheme under which the Government compensates banks and payment service providers for promoting RuPay debit card and low-value BHIM-UPI (P2M) transactions is administered by which one of the following?

  • A. The Department of Financial Services, Ministry of Finance, in coordination with NPCI and banks
  • B. The Department of Revenue, Ministry of Finance, through the Central Board of Direct Taxes and banks
  • C. The Department of Payment and Settlement Systems, Reserve Bank of India, along with member banks
  • D. The Ministry of Electronics and Information Technology, through the Digital India programme division

Q3. A business whose total sales, turnover or gross receipts exceeded fifty crore rupees in the immediately preceding previous year must offer certain electronic modes of payment under Section 269SU of the Income-tax Act, 1961. Consider the following: 1. Debit card powered by RuPay 2. Unified Payments Interface (BHIM-UPI) 3. Unified Payments Interface Quick Response Code (BHIM-UPI QR Code) 4. National Electronic Funds Transfer initiated through internet banking Which of the above is/are correctly identified as modes prescribed for this purpose?

  1. Debit card powered by RuPay
  2. Unified Payments Interface (BHIM-UPI)
  3. Unified Payments Interface Quick Response Code (BHIM-UPI QR Code)
  4. National Electronic Funds Transfer initiated through internet banking
  • A. 1 and 2 only
  • B. 1, 2 and 3 only
  • C. 2, 3 and 4
  • D. 1 and 4 only

Q4. The electronic modes of payment that specified businesses must compulsorily offer under Section 269SU of the Income-tax Act, 1961 were prescribed by which one of the following?

  • A. The Central Board of Direct Taxes, Department of Revenue, Ministry of Finance
  • B. The Central Board of Indirect Taxes and Customs, Department of Revenue, Ministry of Finance
  • C. The Department of Payment and Settlement Systems, Reserve Bank of India
  • D. The Department of Financial Services, Ministry of Finance, with NPCI

Q5. The Taxation and Other Laws (Amendment) Bill, 2026, passed by the Lok Sabha in August 2026, amends how many enactments?

  • A. Two
  • B. Three
  • C. Four
  • D. Five

Q6. What does the Taxation and Other Laws (Amendment) Bill, 2026 do to Section 10A of the Payment and Settlement Systems Act, 2007?

  • A. It substitutes the reference to modes prescribed under the income-tax law with a power for the Central Government to notify such modes
  • B. It repeals the section entirely, so that banks may levy a merchant discount rate on every UPI and RuPay debit card transaction from the date of assent
  • C. It transfers to the Reserve Bank of India the power to fix, for each financial year, the merchant discount rate applicable to notified electronic payment modes
  • D. It raises the turnover threshold for compulsory acceptance of prescribed electronic payment modes from fifty crore rupees to one hundred crore rupees

Q7. Responding in August 2026 to the proposal for a merchant discount rate on UPI, the RBI Governor described the central bank's focus as making digital payments possess a specific set of qualities. How many such qualities did he enumerate?

  • A. Two
  • B. Three
  • C. Four
  • D. Five

Q8. Consider the following regarding the position taken by the Governor of the Reserve Bank of India in August 2026 on charges for UPI: 1. He described discussion of a merchant discount rate structure for UPI as premature at this stage. 2. He observed that the service is not free even now, since the Government subsidises the ecosystem and the costs are being borne somewhere. 3. He announced that a merchant discount rate would apply to UPI transactions above two thousand rupees from the following financial year. 4. He said the central bank's aim is that digital payments be accessible, affordable, safe and sustainable. Which of the statements given above is/are correct?

  1. He described discussion of a merchant discount rate structure for UPI as premature at this stage.
  2. He observed that the service is not free even now, since the Government subsidises the ecosystem and the costs are being borne somewhere.
  3. He announced that a merchant discount rate would apply to UPI transactions above two thousand rupees from the following financial year.
  4. He said the central bank's aim is that digital payments be accessible, affordable, safe and sustainable.
  • A. 1 and 3 only
  • B. 1, 2 and 4 only
  • C. 2, 3 and 4
  • D. 1 and 4 only

Q9. When a merchant discount rate is levied on a card transaction in India, the largest single share of that fee typically accrues to which one of the following?

  • A. The bank that issued the card to the customer, as interchange fee
  • B. The acquiring bank that onboarded the merchant, as its acquiring margin
  • C. The card network that routes and switches the transaction, as network fee
  • D. The Government, as tax on the merchant service charge

Q10. Consider the following about the National Payments Corporation of India: 1. It was established in 2016, the year the Unified Payments Interface was launched. 2. It was set up as an umbrella organisation for retail payment systems with the guidance and support of the Reserve Bank of India and the Indian Banks' Association. 3. It is incorporated as a 'not for profit' company under Section 8 of the company law, promoted by a group of public, private and foreign banks. 4. It is a wholly owned subsidiary of the Reserve Bank of India. Which of the above is/are correctly identified?

  1. It was established in 2016, the year the Unified Payments Interface was launched.
  2. It was set up as an umbrella organisation for retail payment systems with the guidance and support of the Reserve Bank of India and the Indian Banks' Association.
  3. It is incorporated as a 'not for profit' company under Section 8 of the company law, promoted by a group of public, private and foreign banks.
  4. It is a wholly owned subsidiary of the Reserve Bank of India.
  • A. 1 and 4
  • B. 2 and 3 only
  • C. 1, 2 and 3
  • D. 3 and 4

Q11. As UPI completed a decade of operation, in how many countries outside India was it reported to be live?

  • A. Four
  • B. Six
  • C. Eight
  • D. Twelve

Q12. While clarifying in August 2026 that consumers would face no transaction charges on UPI, the Ministry of Finance indicated that the modalities of any threshold-based merchant discount rate would be worked out under whose authority?

  • A. The UPI and Services Steering Committee headed by NPCI
  • B. The Board for Regulation and Supervision of Payment and Settlement Systems, whose approval is necessarily required for every merchant fee levied in India
  • C. The Goods and Services Tax Council, which alone determines all levies borne by digital payment service providers
  • D. The Financial Stability and Development Council, which exclusively decides pricing across all retail payment systems