Industry Odisha Bureau, Aug 4: Aiming to create a sustainable funding model for the growth of the Unified Payments Interface (UPI), the Ministry of Finance under Government of India (GoI) has reportedly proposed to enable the Merchant Discount Rate (MDR) on the transactions made via the Unified Payments Interface (UPI), while no direct fees will be charged from the UPI users.
Media reports stated that, “The Finance Ministry has proposed amending the ‘Payment and Settlement Systems Act, 2007’ to remove the zero‑MDR ban, giving the government power to reintroduce merchant discount rates on UPI, but only for certain merchants, with no direct charges to consumers. Thus, the Ministry of Finance is seeking to scrab ‘Section 10A’ of the ‘Payment and Settlement Systems Act’, which currently bars banks and payment service providers (PSPs) from levying MDR on notified electronic payment modes like UPI and RuPay debit cards. Once Parliament approves the amendment, the Centre can issue a notification specifying ‘which transactions can attract MDR’ as well as ‘the MDR rate and applicable conditions”.
Elucidating the Union Finance Ministry’s proposal, media reports have stated that, “The Bill does not impose any charge on the UPI users, while the burden is expected to fall on certain merchants. The MDR may apply to transactions above Rs 2,000 for large merchants, while small businesses with annual turnover up to Rs 1.5 crore will be exempted.”
Media reports have also highlighted that, “Since the Union Finance Ministry’s proposal has not duly been passed by the Parliament, no MDR will be levied now until the Government of India issues a notification after the Bill is passed in the Parliament.”
Media reports have further mentioned that, “UPI now accounts for 88% of all digital transactions in India, processing over 23 billion transactions worth Rs 30 lakh crore monthly. Citing the need for a viable revenue stream to fund infrastructure, innovation, and cybersecurity, a Parliamentary Standing Committee (PSC) report of March 2026 flagged the zero‑MDR model as ‘financially unsustainable’ in the long run.”
Notably, “Merchant Discount Rate (MDR) is the fee charged to merchants for accepting digital payments such as credit/debit cards, UPI, wallets, and net banking. It is a percentage fee deducted from the transaction amount before the remaining balance is credited to the merchant. Banks, payment gateways, and card networks (Visa, Mastercard, NPCI) collectively receive MDR for processing digital payments.”
