Centre Tables Bill To Allow MDR On Select Digital Payment Modes (Img: X)
New Delhi: The Centre on Tuesday introduced a Bill in Parliament seeking amendments to the Payment and Settlement Systems Act, 2007, which could allow the government to impose Merchant Discount Rate (MDR) charges on selected electronic payment modes, including the Unified Payments Interface (UPI), in the future.
However, the proposed legislation does not introduce any immediate charges on UPI transactions. Instead, it provides the government with legal authority to decide which digital payment methods should continue receiving MDR exemptions and which may attract fees later.
Also Read: Indian UPI Processed Record 23.66 Billion Transactions Worth Rs 29.88 Lakh Crore in July
Merchant Discount Rate (MDR) is a fee charged to merchants by banks and payment service providers for processing digital transactions. It is usually calculated as a percentage of the transaction value.
Currently, UPI transactions do not carry any MDR charges for merchants or users.
The government removed MDR on UPI payments from January 2020 to encourage digital payment adoption across India. The move helped accelerate the growth of UPI among customers, businesses and small merchants by making transactions cost-free.
Since then, UPI has become India's largest digital payment platform, accounting for a major share of electronic transactions. The system currently processes billions of transactions every month, with transaction values running into several lakh crore rupees.
The move comes amid concerns about the long-term financial sustainability of the UPI ecosystem. A Parliamentary Standing Committee on Finance had earlier highlighted that the zero-MDR model could create challenges for payment companies and service providers.
Also Read: UPI records massive growth; Transactions rise from 2 crore to 24,162 crore
The committee noted that while free transactions helped increase adoption, the absence of MDR could affect the ability of companies to invest in infrastructure and future expansion.
The government has clarified that the Bill does not mean users will start paying for UPI immediately. Any decision to introduce charges would require a separate policy decision and would depend on the payment mode, transaction category and other factors.
Reports have suggested that possible MDR charges could be considered for large merchant transactions, but no final decision has been announced by the government.
Digital payment companies have been seeking a sustainable revenue framework to support investments in technology, cybersecurity and expansion of payment infrastructure.
