Any potential Merchant Discount Rate (MDR) on UPI payments is likely to apply only to a small share of transactions, with more than 95% of payments expected to remain unaffected, a senior payments industry official said.
According to the source, only 4% of person-to-merchant (P2M) UPI transactions in 2025-26 were above Rs 2,000. However, these transactions accounted for around two-thirds of the total value of UPI payments.
The official said there was no link between the proposed levy and India-US trade talks. The person, who requested anonymity, said any MDR would not apply to small-value payments at neighbourhood stores where the average transaction is around Rs 100-200. Instead, it would be aimed at larger transactions on e-commerce platforms and in shopping malls, reported The Indian Express.
The debate over a possible MDR gained attention after the government introduced the Taxation and Other Laws (Amendment) Bill, 2026, which proposes changes to the Payment and Settlement Systems Act, 2007. The Bill, passed by the Lok Sabha on Thursday, enables banks and payment system providers to charge fees on UPI and RuPay debit card transactions.
However, Finance Minister Nirmala Sitharaman said the UPI and Services Steering Committee headed by the National Payments Corporation of India is yet to take a decision on MDR. She also said MDR applies only to merchants and not to consumers, adding that it would help banks and fintech firms invest in infrastructure, innovation and security.
The Payments Council of India (PCI) also said consumers will not have to pay to use UPI and that small merchants are not required to pay charges for accepting UPI payments. It said merchant service charges, where applicable, are commercial arrangements between merchants and payment service providers.
The payments industry has argued that additional funding is needed as UPI transaction volumes continue to grow. In 2025-26, more than 24,000 crore UPI transactions worth Rs 314 lakh crore were processed, while the industry's annual operating costs are estimated at around Rs 15,000 crore.
Industry players have proposed an MDR of 0.3-0.6% on UPI payments made to large merchants with annual turnover above Rs 50 crore, while some have suggested a lower fee of 0.05-0.07% with a lower turnover threshold of Rs 1 crore to Rs 1.5 crore. Currently, credit cards attract an MDR of 1-3%, while debit cards are charged up to 0.9%.