‘Baseless, false’: Finance Ministry says no plan for any fee on UPI transactions
&imwidth=800&imheight=600&format=webp&quality=medium "‘Baseless, false’: Finance Ministry says no plan for any fee on UPI transactions")
Representative image Photograph: (PTI)
This zero-MDR regime has been in effect since it was announced in the FY22 Budget by the Union government to boost digital adoption. Previously, merchants paid a fee of under 1 per cent of the transaction amount.
India’s Union Finance Ministry on Wednesday refuted reports suggesting that a fee would be charged on Unified Payments Interface (UPI) transactions and termed them “completely false, baseless, and misleading”.
“Speculation and claims that the merchant discount rate (MDR) will be charged on UPI transactions are completely false, baseless, and misleading,” the ministry said in a post on social media platform X.
“Such baseless and sensation-creating speculations cause needless uncertainty, fear and suspicion among our citizens. The Government remains fully committed to promoting digital payments via UPI,” it added.
What is MDR?
Merchant Discount Rate (MDR) is a fee paid by merchants to banks for processing real-time digital transactions. Currently, UPI and RuPay debit card payments attract no MDR, a policy implemented through the National Payments Corporation of India (NPCI).
This zero-MDR regime has been in effect since it was announced in the FY22 Budget to boost digital adoption. Previously, merchants paid a fee of under 1 per cent of the transaction amount. However, as UPI has become the dominant method for retail payments and RuPay is gaining traction, experts say a complete waiver on MDR may no longer be sustainable.
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Industry appeals for MDR reinstatement
Industry stakeholders have also been questioning the viability of zero-MDR model and highlight the cost burden on banks and payment service providers.
Earlier this year, the Payments Council of India, representing digital payment service providers, wrote to Prime Minister Narendra Modi, requesting the reintroduction of MDR.
It recommended a 0.3 per cent MDR on UPI payments made to large merchants and proposed a nominal, fixed MDR on all RuPay debit card transactions.
Govt continues support through incentives
The Union Cabinet recently extended a ₹1,500 crore incentive scheme designed to compensate stakeholders for the cost of small-value UPI transactions, but fintech companies criticised the amount, arguing it is insufficient to support the surging volume of digital payments.
According to the Reserve Bank of India’s annual report for FY25, digital payments have surged nationwide. UPI accounted for 185.8 billion transactions during the year—a 41.7 per cent increase from 131.1 billion in FY24.