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India Moves to Allow Merchant Fees on UPI Transactions
In India, many people pay for things using a phone app instead of cash or cards.
The system they use is called UPI, and it is very popular, handling billions of payments every month.
Right now, shops and businesses do not have to pay any fees to use UPI.
Some companies that run these payment apps say that is a problem.
They say they need money from fees to keep the system working and improving.
So the government is thinking about letting businesses pay a small fee when they receive money through UPI.
The person buying things would not have to pay the fee — only larger shops might have to.
A law change has been proposed to make charging such fees possible.
No final decision has been made yet.
The government is still discussing the details.
Finance Minister Nirmala Sitharaman tabled an amendment to India's Payment and Settlement Systems Act that would create a legal basis for merchant discount rates (MDR) on digital payments.
No decision has been made on fee levels or where they would apply, according to industry and regulatory sources.
UPI processed 23.6 billion transactions worth 29.9 trillion rupees in July, dominated by Walmart's PhonePe and Alphabet's Google Pay.
The government is considering an MDR of 0.3% to 0.5% on transactions above 2,000 rupees for merchants with annual turnover exceeding 15 million rupees.
A Jefferies report found transactions above 2,000 rupees account for just 4% of merchant payment volumes but about 67% of transaction value.
- Who
- India's Finance Minister Nirmala Sitharaman, along with merchants, banks, and payment firms such as PhonePe and Google Pay
- What
- A bill amendment that would allow the introduction of merchant discount rates (MDR), or fees, on UPI digital payments
- Where
- India, with the bill introduced in parliament in New Delhi
- When
- Tuesday, when the bill was tabled in India's parliament
- Why
- To create a legal basis for charging MDR, which payment firms say is needed to sustain growth and investment in digital payments
Keep UPI Free
Allow Merchant Fees
Charging merchant fees on UPI
Keep UPI Free
UPI transactions are currently free for merchants; keeping them free protects consumers and small businesses, and one proposal would exempt small merchants entirely and apply charges only to large ones.
Allow Merchant Fees
Payment firms earn no fee on UPI transactions, which industry executives say limits their ability to invest in the digital payments ecosystem and makes growth harder to sustain.
Key facts
- UPI transactions in July
- 23.6 billion
- UPI transaction value in July
- 29.9 trillion rupees
- Bill sponsor
- Finance Minister Nirmala Sitharaman
- Proposed MDR rate
- 0.3% to 0.5% on transactions above 2,000 rupees
- Merchant turnover threshold
- Above 15 million rupees annually
- Credit card MDR in India
- About 1.5%
- Debit card MDR in India
- Up to 0.9%
- Large transactions share (Jefferies)
- 4% of volumes, 67% of value
Sources
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