1 week ago
Selective UPI MDR Debate Shifts Toward Merchant Intelligence and Fairness
India is discussing whether some UPI payments should have a small merchant fee called MDR.
A new law allows the government to change the current zero-fee system for certain digital payments.
The government says no new fee has started yet.
Payments between people and payments by small merchants are expected to stay free.
CARD91 says the hardest part may be deciding which businesses should pay.
Banks would need accurate information about each business and what it sells.
They would also need to keep checking whether a business’s details change.
If a business is classified incorrectly, it should have a clear way to fix the mistake.
The company says technology can help, but official rules and human judgment must guide the final decisions.
The Taxation and Other Laws (Amendment) Bill, 2026 creates a legal pathway to modify zero MDR for specified digital payment transactions.
The Government said no immediate UPI charge has been introduced; consumers, person-to-person payments and small merchants remain protected.
CARD91 said any selective MDR system will require accurate merchant verification, classification and ongoing risk monitoring.
UPI processed 23.66 billion transactions worth approximately ₹29.88 lakh crore in July 2026.
CARD91 said technology should support, rather than replace, institutional judgment and rules set by the Government, RBI and NPCI.
- Who
- The Government, banks and acquiring institutions, CARD91, and merchants are involved; Ajay Pandey and A.G. Ramakrishna stated CARD91’s views.
- What
- The passage of the Taxation and Other Laws (Amendment) Bill, 2026 has reopened debate over selective Merchant Discount Rate charges on UPI transactions.
- Where
- The statement was issued from Bangalore, Karnataka, India, and concerns India’s UPI ecosystem.
- When
- The statement was issued on August 21, 2026; the cited UPI transaction figures are for July 2026.
- Why
- A selective MDR framework would require accurate merchant identity, business classification and current risk information to apply rules consistently.
Key facts
- Legislation
- The Taxation and Other Laws (Amendment) Bill, 2026 creates a legal pathway to modify zero MDR for specified digital payment transactions.
- Current charges
- The Government said no immediate MDR charge has been introduced.
- Protected payments
- Consumers and person-to-person payments will remain free, and small merchants will remain protected.
- UPI scale
- UPI processed 23.66 billion transactions worth approximately ₹29.88 lakh crore in July 2026.
- Implementation needs
- CARD91 identified merchant verification, classification, profile monitoring and error correction as key requirements.
- Regulatory responsibility
- Future MDR rules and operating requirements must be established by the Government, the Reserve Bank of India and the National Payments Corporation of India.
- CARD91 capability
- CARD91 said it introduced an AI-led merchant verification and classification capability in July 2025.
Quotes
A.G. Ramakrishna
Chief Product Officer of CARD91
“The most difficult part of a selective MDR framework may not be setting a rate; it will be applying the policy consistently to the right merchant. Whatever parameters are eventually adopted, banks and acquirers will need verified and explainable information about the businesses accepting payments. The quality of merchant data will directly influence how fairly any differentiated framework operates.”
theprint.in
“The goal should not be to add more friction to merchant acceptance. It should be to ensure that legitimate businesses are treated consistently while financial institutions have the information required to manage risk and implement policy responsibly.”
theprint.in
Sources
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