Will UPI payments become chargeable? Centre moves to enable MDR
What's the story
The Indian government has introduced a bill to amend the Payment and Settlement Systems Act, 2007. The proposed amendment would allow the government to impose Merchant Discount Rate (MDR) on electronic payment modes, including Unified Payments Interface (UPI). This change would end UPI's automatic zero-MDR status and give the government discretion over future charges. However, no charges have been imposed yet.
Fee explained
What is Merchant Discount Rate (MDR)
MDR is a fee that banks and payment providers charge businesses for processing digital transactions. It is usually levied as a percentage of the transaction value.
The proposed amendment to the Payment and Settlement Systems Act, 2007, would give the government power to decide which digital payment modes should remain exempt from charges and which could attract MDR in the future.
Growth trajectory
Government mandated zero MDR on UPI in January 2020
In 2020, the central government mandated that no MDR should be levied on UPI from January 2020.
This move was aimed at promoting digital payments and has since led to massive adoption of UPI by customers and merchants alike.
Today, nearly 88% of all digital transactions in India take place through UPI, processing over 23 billion transactions worth nearly ₹30 lakh crore every month.
Sustainability issues
Standing Committee on Finance report
A report by the Standing Committee on Finance, dated March 12, 2026, said zero MDR was introduced to make digital transactions affordable and widely accessible.
However, it warned that the absence of MDR had made the UPI ecosystem financially unsustainable.
The committee also said that UPI could grow tenfold in coming years with India's demographics, economic growth, and geographic reach.
Subsidy status
Proposed amendment gives government power to impose MDR
The central government has not disbursed the UPI subsidy for the last financial year.
Payment companies have been claiming that they would need a revenue model to invest in growing UPI for its next phase of growth.
The proposed amendment to the Payment and Settlement Systems Act, 2007, does not impose MDR on UPI transactions immediately but gives the government power to do so in future.