A big news is coming regarding UPI, which has become the backbone of the digital revolution in India. According to recent reports, the Central Government is seriously considering the option of imposing Merchant Fee i.e. Merchant Discount Rate (MDR) on UPI payments of more than Rs 2,000 for large corporate and business establishments. If this proposal is approved, it could be the biggest policy change ever in the digital payment ecosystem of the country. Let us also tell you what kind of news has come out regarding UPI fees.
Consideration of implementing MDR
According to Moneycontrol report, the government is considering implementing Merchant Discount Rate (MDR) on UPI payments made to big merchants. This fee can be less than 0.5 percent and can be applicable on transactions of more than Rs 2,000. MDR is the fee that banks charge for processing real-time digital transactions. A senior government official said in a media report that the government is currently considering this proposal and a decision on it is expected within two weeks. MDR will be imposed only on big merchants and businesses.
Cost is continuously increasing
Another government official clarified that this proposal does not include taking money from customers for using UPI. The official said that the purpose of MDR is not to take money from customers for UPI transactions. The conversation is about merchant-side economics and sustainability of the payment ecosystem. According to officials, UPI has expanded rapidly, but the cost for banks and others associated with the payment ecosystem in maintaining the infrastructure required for it is also increasing. Another official said that it is believed that this model should be commercially sustainable over time.
The central government currently provides incentives to banks and other payment system operators for low value UPI transactions up to Rs 2,000. “Incentive Scheme for Promotion of RuPay Debit Card and Low Value BHIM-UPI Transactions” was launched in FY 2022 to accelerate adoption of digital payment platform among diverse people, modernize financial transactions and promote financial inclusion.
What does the standing committee report say?
A report of the Standing Committee on Finance dated March 12, 2026, said that Zero MDR was implemented to make digital transactions cheaper and accessible to more people. However, it warned that due to the absence of MDR, the UPI ecosystem is no longer economically sustainable. The committee said that due to India’s demographics, economic growth and geographical reach, the expansion of UPI can be tenfold in the coming years. It is estimated that this platform can add 600 million more users in the next five to seven years and process 100-150 billion transactions every month. The report said that UPI’s slow growth pace and structural funding gap is making it difficult to reach this level, which limits the ecosystem’s investment in infrastructure, security and merchant onboarding.
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