Govt May Allow MDR Charges on UPI Payments Above ₹2,000

The government is considering allowing banks and payment service providers to levy a Merchant Discount Rate (MDR) of 0.25% to 0.4% on UPI transactions above ₹2,000 made to businesses, according to a Times of India report. However, person-to-person UPI transfers are expected to remain outside the proposed charges.

The move is aimed at creating a sustainable revenue model for India’s rapidly expanding UPI ecosystem. Currently, banks and payment companies are not permitted to charge MDR on notified UPI transactions, with the government supporting the system through subsidies.

Official estimates cited in the report suggest that transactions above ₹2,000 account for only around 5% of UPI transaction volume but nearly 65% of the total transaction value. In July, UPI recorded around 23.7 billion transactions worth approximately ₹29.9 lakh crore.

The proposed fee is expected to primarily affect merchant payments rather than everyday small purchases. The government may also introduce a maximum cap on the charge to limit the burden on businesses.

Credit and debit card transactions already attract MDR charges. However, no final decision has been taken yet, and the government is still considering how the proposed UPI fee structure would be implemented.