1 week ago
UPI MDR Above ₹2,000 May Begin Within Two Weeks
Businesses may soon have to pay a small fee when customers make certain UPI payments.
The reported fee is 0.3% for transactions of ₹2,000 or more.
Customers are expected to keep using these UPI payments for free.
The Department of Financial Services may issue a notification within a week.
After that, a committee led by the National Payments Corporation of India will decide how the fee works.
The exact rate and types of transactions covered have not been finalized.
UPI has grown very quickly, so banks and payment companies have spent more on keeping it running.
Industry groups say current government support does not cover those costs.
The proposed fee is intended to help make the payment system more financially sustainable.
A proposed 0.3% merchant discount rate may apply to UPI transactions of ₹2,000 and above.
The Department of Financial Services is expected to issue a gazette notification within a week.
An NPCI-led committee is expected to determine the levy’s final scope, structure and rate.
Consumers are expected to continue using qualifying UPI payments without direct transaction charges.
The proposal aims to address rising infrastructure costs and reduce reliance on government subsidies.
- Who
- The Department of Financial Services, the National Payments Corporation of India-led UPI and Services Steering Committee, payment intermediaries and merchants are involved; consumers are expected to remain exempt from direct charges.
- What
- A merchant discount rate, reportedly 0.3%, may be introduced for UPI transactions of ₹2,000 and above, while the final framework is still to be determined.
- Where
- The proposal concerns India’s Unified Payments Interface system.
- When
- A gazette notification is expected within a week, with the MDR announcement or implementation process expected within two weeks; no exact date is confirmed.
- Why
- The proposal is intended to help cover payment infrastructure and operating costs and reduce dependence on government subsidies.
Consumer and Government Protection
Industry Sustainability
Keeping UPI free for users
Consumer and Government Protection
The government has assured Parliament and consumers that MDR will not be directly passed on to users of qualifying UPI transactions.
Industry Sustainability
Payment intermediaries argue that merchants or other parts of the ecosystem need to contribute because processing and infrastructure costs have increased.
Maintaining government support
Consumer and Government Protection
Government incentives and zero MDR helped encourage the shift from cash to digital payments, and the proposed framework would preserve free consumer access.
Industry Sustainability
The Parliamentary Standing Committee on Finance said the ₹2,000 crore allocation covers barely 10% of estimated operating costs and could leave providers dependent on inadequate subsidies.
How the levy should be structured
Consumer and Government Protection
The proposal would target transactions above a specified threshold or certain merchants rather than restoring MDR universally.
Industry Sustainability
The committee called for an early tiered MDR framework, while the Department of Financial Services is examining options including high-value transaction charges and a tiered incentive structure.
Key facts
- Reported MDR
- 0.3% on UPI transactions of ₹2,000 and above.
- Final rate and scope
- The NPCI-led committee is expected to determine the final rate, coverage and structure after the government notification.
- Consumer charges
- The government has said qualifying UPI transactions will remain free for consumers.
- Zero MDR policy
- Zero MDR has applied to UPI and other specified digital payments since January 2020.
- FY26 UPI volume
- UPI processed 241.62 billion transactions worth ₹314.23 lakh crore.
- Government allocation
- The 2026–27 budget allocated ₹2,000 crore for UPI-related support.
- Estimated operating cost
- The industry estimates annual UPI operating costs at ₹20,700 crore, compared with the ₹2,000 crore allocation.
Sources
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