Finance Ministry Proposes Reintroducing MDR on Large UPI Transactions

The Ministry of Finance has proposed amendments to the Payment and Settlement Systems Act, 2007, which could reintroduce the Merchant Discount Rate (MDR) on UPI and RuPay debit card transactions. This change would specifically target large merchants with an annual turnover exceeding ₹50 crore, marking a potential shift from the zero-MDR policy that has been in effect since January 2020.

The move addresses concerns regarding the financial sustainability of the current payment ecosystem. A March 2026 report by the Parliamentary Standing Committee on Finance highlighted that the zero-MDR framework is becoming unsustainable for payment service providers. With UPI processing over 23 billion transactions valued at nearly ₹30 lakh crore in July alone, the government is seeking a balance between maintaining digital adoption and ensuring the viability of the underlying infrastructure.

If enacted, the amendment will empower the Central Government to notify specific transactions subject to MDR. While the burden is expected to fall on large merchants rather than consumers, the industry will be watching closely to see how this impacts the growth trajectory of UPI. The policy change aims to ensure that the digital public infrastructure remains robust and capable of handling increasing transaction volumes without compromising service quality.