Bill reopens possibility of MDR on UPI, especially for large merchants
The proposed Taxation and Other Laws (Amendment) Bill, 2026 would allow the government to specify which digital payment modes remain exempt from merchant charges. It does not immediately impose MDR on UPI, but creates a route for future notification after passage.
What happened
The government’s proposed Bill would let it decide which electronic payment modes remain exempt from merchant charges, reopening debate on MDR for UPI,
Key facts
- Taxation and Other Laws (Amendment) Bill, 2026
- Payment and Settlement Systems Act, 2007
- March 31, 2041
Why this matters
Potential UPI MDR differentiation would increase the strategic value of payment orchestration, acquiring partnerships, and fintech assets that reduce acceptance costs for high-volume merchants.
What to watch
- Passage of the Taxation and Other Laws (Amendment) Bill, 2026 and final wording of the digital-payment exemption provisions.
- Finance Ministry or RBI notification defining exempt payment modes, merchant categories, transaction thresholds or MDR caps.
- Budget documents or subsidy allocations for UPI payment infrastructure and bank/PSP reimbursement.
- NPCI, RBI, Indian Banks' Association, payment-aggregator and large-retailer consultation papers or public comments.
- Any distinction between P2M UPI, online UPI, QR payments, credit-on-UPI, cross-border UPI and recurring payments.
- Payment providers introducing new platform, settlement, device, reconciliation or value-added-service fees before an MDR notification.
- Large marketplaces, quick-commerce firms and organised retailers changing checkout incentives, minimum order policies or payment-routing practices.
- Model UPI-cost exposure by merchant entity, payment aggregator, store format, ticket size and online versus offline channel; stress test capped MDR ranges of 10-30 basis points.
- Review acquiring and payment-gateway contracts for fee-change clauses, pass-through rights, settlement charges and exclusivity commitments.
- Build a tender-cost dashboard covering UPI, cards, wallets, cash and BNPL to identify where payment steering or checkout-routing could become economic.
- Engage industry associations on a differentiated framework that protects low-ticket and small-merchant transactions while capping large-merchant charges.
- Avoid consumer-facing surcharge plans until regulations explicitly permit them; prepare customer messaging and loyalty incentives for non-UPI tender shifts if needed.
- Use the policy uncertainty in negotiations with banks, aggregators and PSPs to secure volume-based pricing, capped fee schedules and longer settlement terms.