UPI Transaction Fee
The Indian government is considering allowing a Merchant Discount Rate (MDR) on UPI payments exceeding ₹2,000 made to businesses . The proposal follows amendments to the Payment and Settlement Systems Act aimed at creating a legal framework for charging merchant fees (UPI Transaction Fee) on selected digital transactions.
The proposal is expected to apply only to merchant payments and not to person-to-person (P2P) transfers.
Reports indicate that MDR could range between 0.25% and 0.4% for eligible business transactions above ₹2,000. This means everyday transfers between individuals are likely to remain free if the proposal is implemented.
Banks and payment companies have argued that maintaining a zero-fee UPI ecosystem has become financially challenging as transaction volumes continue to rise.
The RBI has also indicated that the cost of maintaining digital payment infrastructure must ultimately be borne by someone. The proposed MDR is intended to create a sustainable revenue model while preserving the convenience of UPI for most users. However, no final policy decision has yet been announced.
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