The Indian government is considering reintroducing Merchant Discount Rate (MDR) on UPI payments above ₹2,000 through the proposed Payment and Settlement Systems (Amendment) Bill. The legislation would give the Centre greater flexibility to decide which digital payment modes must remain free of charge, potentially ending the zero-MDR regime introduced in 2020.
Under the proposal, the government is reportedly examining an MDR of 0.25% to 0.4% on UPI payments above ₹2,000 made to businesses. Person-to-person transfers would remain free, while charges applied on large merchants are under consideration to protect small businesses and consumers from additional costs.
The discussion comes as UPI transaction volumes continue to surge. In July 2026, UPI recorded 23.66 billion transactions worth ₹29.9 lakh crore, compared to ₹21.3 lakh crore in FY 2019-20. Banks, payment firms, and Parliament’s Standing Committee on Finance have argued that the zero-MDR policy has left the digital payments ecosystem without a sustainable revenue model despite rising infrastructure and cybersecurity costs.
Commenting on the proposal, RBI Governor Sanjay Malhotra said it was too early to discuss specific charges, as the government is still finalising the legislative amendment. He reiterated that the cost of operating UPI infrastructure must ultimately be borne by the government, businesses, or consumers, while stressing that digital payments should remain affordable, accessible, safe, and sustainable.
No final decision has been taken on the UPI MDR charge above ₹2,000, and the proposal remains under government consideration.
