Proposed MDR framework could reopen UPI cost debate for larger retail transactions
A proposed amendment to India’s payment law could enable merchant discount rates on selected digital payments, including high-value UPI. The case for tiered charges centres on funding payment infrastructure while retaining zero-fee acceptance for low-ticket transactions and smaller merchants.
What happened
A proposed amendment to the Payment and Settlement Systems Act could let India levy MDR on selected digital payments, including high-value UPI transactions. The
Key facts
- UPI monthly volume exceeds 21.7 billion transactions
- UPI monthly value exceeds ₹28.33 lakh crore
- ₹2,485 crore digital-payment incentive allocation in FY24
- ₹1,146 crore in FY25
- ₹2,200 crore budgeted in FY26
- ₹2,000 crore estimated for FY27
- Incentives cover about 11% of actual industry costs
- Incentives equal about 14% of foregone MDR revenue
- Estimated annual operating costs: ₹20,000 crore
- RuPay Credit Card on UPI and PPI wallet MDR: up to 2% above ₹2,000
- Low-ticket purchases represent over 80% of UPI transaction volume
- India financial inclusion index: 67%
Why this matters
Reassess partnerships with payment gateways, acquirers and UPI infrastructure providers that could gain strategic value if high-value UPI economics become monetizable.