A service provider low cost charge (MDR) of 0.3% on UPI transactions of Rs 2,000 and above is predicted to be introduced inside two weeks, sources stated on Thursday.
The Division of Monetary Providers will probably situation a gazette notification inside every week specifying the digital cost modes that may proceed to obtain statutory safety from prices. Thereafter, the UPI and Providers Steering Committee, headed by the Nationwide Funds Company of India (NPCI), will decide the MDR, its scope and construction, sources stated.
MDR is a charge paid by businesses to cost processors for accepting digital funds.
The federal government has assured that UPI transactions will stay free for customers. The reassurance was made throughout a debate in Parliament on the Taxation and Different Legal guidelines (Modification) Invoice, 2026, which amended Part 10A of the Fee and Settlement Programs Act, 2007, to pave the way in which for MDR on UPI transactions above a sure threshold.
Regulatory Framework
An MDR of as much as 0.3% of the transaction worth utilized to UPI person-to-merchant transactions till December 2019. Zero MDR was launched in January 2020 to speed up digital cost adoption and encourage a shift from money to digital funds. The federal government subsequently launched an incentive scheme to help banks and different ecosystem individuals and encourage digital funds by offering an incentive equal to 0.15% MDR on UPI transactions as much as Rs 2,000.
With a large bounce in UPI transactions for the reason that Covid-19 pandemic, banks and different cost intermediaries have ramped up investment in cost infrastructure, resulting in business requires the restoration of prices to make the system sustainable.
Reintroduction of MDR at 0.3% on UPI transactions above a threshold would nonetheless be a lot decrease than the prevailing MDR of 1-3% on bank cards and as much as 0.9% on debit card transactions.
Unified Funds Interface (UPI) is the world’s largest real-time cost system by quantity, with a share of practically 50%. UPI accounted for 85% of India’s digital cost transactions by quantity in 2025-26. UPI processed 241.62 billion transactions value Rs 314.23 lakh crore in FY26.
Business Affect
The Parliamentary Standing Committee on Finance not too long ago known as for the early implementation of a tiered MDR framework for UPI transactions, warning that delays might go away cost service suppliers depending on insufficient authorities subsidies and weaken funding in cost infrastructure.
The panel flagged the sharp mismatch between the Rs 2,000 crore budgetary allocation for 2026-27 and the business’s estimated operational value of Rs 20,700 crore for working UPI. It stated the allocation lined barely 10% of precise operational prices. The estimate relies on an operational value of Rs 1.38 per transaction and round 150 billion P2M (person-to-merchant) transactions recorded final yr.
To scale back the burden on the exchequer, the Division of Monetary Providers had instructed the panel that it was analyzing two choices: restoring MDR for sure high-value transactions or retailers, and introducing a tiered incentive construction to “section out authorities help within the subsequent few years.”
Disclaimer: This text is for informational functions solely and shouldn’t be construed as funding recommendation. Traders ought to assess their monetary targets, threat urge for food and seek the advice of a professional monetary advisor earlier than making funding selections.
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