Payments Council Backs MDR On UPI, Says Sustained Investment Key To Ensuring Reliability

New Delhi, Aug 8 (KNN) The Payments Council of India (PCI) has supported discussions around introducing a merchant discount rate (MDR) for the Unified Payments Interface (UPI), stating that sustained investment is essential to maintain the country’s real-time digital payments infrastructure.

PCI, an industry body representing digital payments companies, said the growing scale of UPI requires continuous spending on technology, cybersecurity, fraud prevention and customer support to ensure reliability and security.

In a post on X, PCI said, “As the ecosystem continues to expand, discussions are taking place on how to sustainably support the infrastructure that enables billions of secure transactions every month, while continuing to ensure that consumers and small merchants remain protected.” 

No Charges for Consumers and Small Merchants

The council clarified that consumers will continue to use UPI free of charge. It also stated that small merchants will not be required to pay MDR for accepting UPI payments.

Concerns around user charges have been raised in recent public discussions, but PCI emphasised that any applicable merchant service fees would be part of commercial arrangements between merchants and payment service providers, a standard global practice.

Policy Context and Legislative Changes

The development follows the passage of the Taxation and Other Laws (Amendment) Bill, 2026, by the Lok Sabha. The Bill amends the Payment and Settlement Systems Act, 2007, giving the government the authority to decide which digital payment methods can remain free and which may attract charges.

This change replaces the earlier framework linked to the Income Tax Act, potentially allowing the introduction of MDR on UPI transactions, which have operated under a zero-MDR regime since 2020.

Rising Scale of UPI Ecosystem

Launched in 2016, UPI has grown into one of the largest real-time payment systems globally, supported by institutions such as the National Payments Corporation of India (NPCI) and the Reserve Bank of India (RBI), along with banks and fintech firms.

The platform handled 23.65 billion transactions worth Rs 29.87 trillion in July, up from 20 billion transactions valued at Rs 24.85 trillion a year earlier.

(KNN Bureau)