
Free UPI made India the world’s number-1 in digital payments, but now banks and payment providers need to be protected from losses. By levying small fees on large transactions, investment in infrastructure and new technology will be ensured.
Modi government is going to bring a big change in Unified Payments Interface (UPI). According to sources, Merchant Discount Rate (MDR) can be implemented again on UPI transactions of more than ₹ 3000. Small transactions (up to ₹ 3000) will remain free. The “ZeroMDR” policy, which has been in place since January 2020, i.e. the rule of zero fees on merchants, may end.
What is the reason for the sudden change?
1. Difficulties of banks and payment companies: According to NDTV Profit, banks and payment companies are facing more difficulties. UPI now accounts for 80% of retail digital transactions. The increasing number of large transactions (especially merchant payments) has increased the operational cost of banks. They are not getting any incentive for investment from ZeroMDR.
2. Shocking figures: The total value of merchant payments on UPI has reached ₹ 60 lakh crore since 2020. Providing free service on such a large scale is no longer sustainable.
What is the new proposal?
The Payments Council of India (PCI) has suggested, “0.3% MDR should be imposed on large merchants (whose turnover is high).” Currently, the MDR on credit/debit cards is 0.9% to 2% (except RuPay cards). RuPay credit cards will be spared from this fee for now.
Last week, a high-level meeting was held between the Prime Minister’s Office (PMO), the Department of Economic Affairs and Financial Services of the Ministry of Finance. The future of UPI was discussed in it and preparations are on to take a decision on the MDR framework.
Whatj will happen next?
The decision will be taken in the next 12 months after consultation with banks, fintech companies and National Payments Corporation of India (NPCI). The aim is clear – not just to promote UPI, but to make the entire ecosystem of digital payments sustainable in the long run.
Why is this necessary?
Free UPI made India the world’s number-1 in digital payments, but now banks and payment providers need to be protected from losses. By imposing small fees on large transactions, investment in infrastructure and new technology will be ensured.