Government May Reintroduce UPI Merchant Fees on Transactions Above ₹3,000

In a move that could reshape the digital payments ecosystem, the Indian government is evaluating the reintroduction of Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions above ₹3,000, as per a NDTV Profit news report. This shift aims to alleviate the financial burden on banks and payment service providers that currently manage a vast volume of transactions under the zero-MDR regime.

Banks Push for Cost Recovery Amid Growing UPI Usage

Banks and fintech firms have voiced concerns over rising costs linked to high-value digital payments. UPI, now accounting for nearly 80% of all retail digital transactions in India, has seen its person-to-merchant transaction value touch ₹60 lakh crore since 2020. While this reflects widespread consumer trust and deep market penetration, the absence of MDR has restricted incentives for further investment and infrastructure development.

New Proposal May Exempt Small-Ticket Transactions

As per NDTV Profit, the proposed MDR policy will likely exempt small-ticket UPI payments, keeping the focus on large-value transactions.

The Payments Council of India has suggested a 0.3% MDR for large merchants on UPI transactions. In comparison, MDR on credit and debit card payments currently ranges between 0.9% and 2%, excluding RuPay.As per NDTV Profit, RuPay credit cards are expected to remain outside the MDR scope for now.

A decision is anticipated in one to two months following consultations with stakeholders, including banks, fintech firms, and the National Payments Corporation of India.

Read More: UPI Transactions Hit All-Time High of ₹25.14 Lakh Crore!

Conclusion

If implemented, the reintroduction of MDR would signify a shift from prioritising UPI adoption towards sustaining the long-term health of India’s digital payments landscape. This policy reconsideration comes at a time when the sector demands greater financial viability for continued innovation and infrastructure growth.

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