Govt Mulls MDR On UPI Transactions Above Rs 3,000 To Ease Banking Costs: Report
UPI now commands nearly 80 per cent of all retail digital transactions in India. However, with no revenue generated from high-value transactions under the zero-MDR regime
In a bid to ease financial pressure on banks and payment service providers, the government is reportedly considering a proposal to reintroduce the Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions exceeding Rs 3,000. The move is aimed at addressing infrastructure and operational costs tied to high-value digital payments, sources told NDTV Profit.
Current discussions suggest a shift from the existing structure by linking MDR to transaction value rather than merchant turnover, a model that would differentiate small-value payments from high-value ones. This change could signal the end of the zero-MDR framework that has been in place since January 2020.
"While small-ticket UPI payments would likely remain exempt, larger transactions could soon carry a merchant fee, reversing the zero-MDR policy in place since January 2020," a source told NDTV Profit.
UPI Dominance Puts Pressure On Cost Structures
UPI now commands nearly 80 per cent of all retail digital transactions in India. However, with no revenue generated from high-value transactions under the zero-MDR regime, banks and payment companies have expressed concerns over sustainability and rising costs. Many believe the absence of MDR has dampened enthusiasm for further investment in digital infrastructure.
In response, the Payments Council of India has recommended a 0.3 per cent MDR on large merchants for UPI transactions to help maintain and scale the digital payments ecosystem, as per the report.
RuPay Credit Cards Likely Exempt
Currently, MDR charges on debit and credit card transactions range between 0.9 per cent and 2 per cent, with RuPay cards largely excluded from this pricing structure. This exemption may continue for RuPay credit cards if the new MDR framework is implemented. "RuPay credit cards are expected to remain outside the Merchant Discount Rate scope for now," a source told NDTV Profit.
Policy Decision Expected Within Months
Government officials indicate that a final decision could be reached within one to two months after engaging with key stakeholders, including banks, fintech companies, and the National Payments Corporation of India (NPCI). If implemented, the change would represent a strategic shift, from promoting widespread adoption to ensuring the financial sustainability of India’s digital payment systems, the report added.
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