Government mulls modest merchant fee on high-value UPI trades, consumers stay exempt

The government clarified that UPI transactions for individuals will continue to be cost-free, but a modest Merchant Discount Rate may be levied on a narrow band of high-value merchant payments, likely ranging from 0.25% to 0.4% above a Rs 2,000 threshold. Experts explain that MDR is a percentage taken from the merchant’s receipt to cover bank, network and acquirer fees, as is done with credit and debit cards. The amendment to the Payment and Settlement Systems Act is intended to create a sustainable revenue stream for the UPI ecosystem, which now processes billions of transactions monthly.

RBI Governor Sanjay Malhotra and Finance Minister Nirmala Sitharaman emphasized that any cost ultimately falls on the broader economy, not on consumers. The final MDR structure will be decided by the NPCI-led UPI Services Steering Committee, with implementation challenges such as accurate merchant turnover reporting still to be resolved.