The government is exploring the idea of reintroducing a Merchant Discount Rate (MDR) on UPI transactions exceeding Rs 3,000.
The move, aimed at mitigating operational and infrastructure costs for banks and payment service providers, could end the zero-MDR policy that has been in place since January 2020.
According to reports, the government is discussing a framework where MDR would be based on transaction value rather than merchant turnover. While small-ticket UPI payments would likely remain exempt, larger transactions could soon carry a merchant fee. This shift comes as stakeholders in the banking and fintech industries argue that the existing zero-MDR regime limits incentives for investment in digital payments.
The Payments Council of India has proposed a 0.3% Merchant Discount Rate for large merchants conducting UPI transactions. Currently, MDR on credit and debit card payments ranges from 0.9% to 2%, excluding RuPay transactions, which remain exempt.
Government officials indicate that consultations with banks, fintech firms, and the National Payments Corporation of India are ongoing, with a final decision expected in the coming months. If implemented, the policy would signal a transition from incentivising UPI adoption to ensuring long-term financial sustainability within the digital payments landscape.
As discussions unfold, digital payment users and businesses alike await clarity on how this decision will shape the future of India’s cashless economy.
