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New UPI MDR Charges Raise Fears of Cash Return
India plans to charge a fee on some large UPI payments made to merchants.
The fee will start on October 15.
Most affected payments will receive a charge of 0.4%, with a maximum of Rs 300.
Some services, such as railways and fuel, will have a Rs 5 charge.
A research group called GTRI says these fees could make some people use cash again.
It says the government does not need the fee to save money.
GTRI also believes pressure from the United States may be connected to the change.
The group warns that weakening UPI could hurt India economically and strategically.
UPI merchant payments above Rs 2,000 will incur a 0.4% MDR from October 15, capped at Rs 300.
Railways, telecom, insurance and fuel transactions above Rs 2,000 will face a flat Rs 5 MDR.
The Global Trade Research Initiative warns that fees could drive small merchants and price-sensitive consumers back to cash.
GTRI argues that UPI charges are not needed to raise revenue because keeping the system free costs the government Rs 2,000-2,500 crore annually.
GTRI suggests US concerns over UPI and RuPay may be influencing the policy and warns of wider economic and strategic costs.
- Who
- The Indian government, UPI users and merchants are affected; the Global Trade Research Initiative raised the concerns.
- What
- A new Merchant Discount Rate will apply to certain UPI merchant payments above Rs 2,000.
- Where
- The policy applies to UPI merchant transactions in India.
- When
- The charges are scheduled to take effect on October 15; the articles do not specify the year.
- Why
- GTRI says the fees could discourage digital payments and suggests that US objections to UPI and RuPay may be contributing to the policy change.
Key facts
- Threshold
- UPI merchant payments above Rs 2,000
- Standard MDR
- 0.4% of the transaction
- Maximum charge
- Rs 300
- Concessional MDR
- Flat Rs 5 for specified categories including railways, telecom, insurance and fuel
- Effective date
- October 15
- Government cost of free UPI
- Rs 2,000-2,500 crore annually, according to GTRI
- NPCI FY2025 figures
- Rs 3,270 crore in earnings and Rs 1,552 crore in surplus, according to GTRI
- US position cited
- The United States Trade Representative objected to the preferential position of UPI and RuPay in its 2026 report
Quotes
Ajay Srivastava
Founder of the economic think tank GTRI
“India should have shown similar resolve. The government can easily afford free UPI; weakening it would impose far greater economic and strategic costs on India. And the US may soon press for restrictions on Rupay card, and withdrawal of NPCI's proposed 30 per cent market-share cap”
rediff.com
“MDR could push small merchants and price-sensitive consumers back towards cash”
rediff.com
Sources
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