UPI May See 30 Basis Points MDR On High-Value Transactions

The merchant discount rate (MDR) on UPI transactions could range between 25 and 30 basis points, according to Moneycontrol. The discussions are still ongoing, and the final rate may change.

A basis point is one-hundredth of a percentage point. A charge of 25 basis points would translate into 25 paise for every ₹100 spent, or ₹25 for every ₹10,000 paid through UPI.

The MDR is likely to apply only to high-value payments and large commercial entities, though the exact thresholds for these categories are still being worked out, the report said. The final rate will depend on the exemptions decided by the government.

MDR on UPI transactions stood at 30 basis points before 2020, when the government mandated zero MDR to encourage the adoption of digital payments across the country.

MDR applies only to merchant transactions and does not involve charging consumers for UPI payments. Debit and credit cards already attract MDR, with debit card charges at around 80-90 basis points and credit card charges going up to 250 basis points.

Preliminary estimates suggest that a 25 basis points levy on merchant transactions above ₹2,000 could generate close to ₹13,000 crore in annual revenue.

Bill Introduced In Parliament

On August 3, the government introduced a bill in Parliament to amend or repeal a rule that had barred banks and payment firms from charging for certain digital transactions. This rule formed the basis for the zero MDR mandate introduced in 2020.

The bill does not explicitly mention the reintroduction of MDR, but industry sources say it is one of the possible outcomes of the proposed changes. Following parliamentary approval, the government may issue an official gazette notification specifying the commission percentages and the categories of merchants and transactions subject to the charge. The Reserve Bank of India is then expected to clarify the revenue-sharing model among stakeholders in the digital payments ecosystem.

UPI's Growing Scale

Around 88% of all digital transactions in India currently happen through UPI, with the platform processing more than 23 billion transactions worth close to ₹30 lakh crore every month.

A report by the Standing Committee on Finance, dated March 12, 2026, said the zero MDR policy had made digital transactions affordable and widely accessible, but warned that the absence of MDR had made the UPI ecosystem financially unsustainable.

The committee projected that UPI could grow tenfold in the coming years, driven by India's demographics, economic growth and geographic reach. It estimated the platform could add 600 million more users and handle 100-150 billion transactions a month over the next few years.

The government has also not released UPI incentive funds allocated for the previous financial year. Industry players say a sustainable monetisation framework is needed to support the next phase of the platform's growth.