Government Evaluates Reintroducing UPI Merchant Discount Rate for Large Transactions

The Indian government is currently evaluating a proposal to reintroduce a merchant discount rate (MDR) on Unified Payments Interface (UPI) transactions. This potential policy change would specifically target large merchants, with the proposed rate likely set below 0.5 percent for transactions exceeding ₹2,000. The move is intended to enhance the financial sustainability of the digital payments ecosystem.

Officials have clarified that the proposed MDR would apply only to merchants with an annual turnover of approximately ₹1 crore to ₹1.5 crore or more. Crucially, the government has emphasized that this change will not result in any additional charges for consumers. Furthermore, small merchants, who represent nearly 90 percent of all businesses currently accepting UPI payments, are expected to remain entirely exempt from these charges.

This evaluation comes against the backdrop of massive growth in India's digital payment infrastructure. In FY26, annual UPI transaction volumes reached nearly 242 billion, with a total transaction value of approximately ₹314 lakh crore. By targeting only large-scale merchants, the government aims to balance the need for a sustainable revenue model for payment service providers with the continued goal of promoting digital financial inclusion across the country's vast network of small-scale enterprises.