Here’s how much MDR could be charged on UPI and RuPay transactions
Only on payments above Rs 2,000 for large merchants, 96% of transactions to remain unaffected, sources note levy needed for further adoption of UPI, point to near universal adoption of Brazil's Pix
- Aug 11, 2026,
- Updated Aug 11, 2026 2:17 PM IST
Transactions through Unified Payment Interface (UPI) and RuPay debit cards could see a merchant discount rate (MDR) of up to 0.4% as per initial discussions, sources have indicated, but underlined that this will be only on payments above Rs 2,000 to large merchants.
“As per ongoing discussions, the MDR will be in the range of 0.4% but will vary for UPI and Rupay,” said a person familiar with the development, adding that the exact rate is yet to be finalised. However, there will be no impact on consumers, and they will be able to continue using UPI free of cost.
On merchants too, it would apply only on a limited set of transactions, leaving about 96% of transactions unaffected, the source said. “Only 4-5% of the large merchants will be impacted. There is a view that several of them have largely not promoted UPI or RuPay cards over the last five to six years and continue to promote credit cards that have a much higher MDR,” the source noted.
The Rajya Sabha on August 10 passed the Taxation and Other Laws (Amendment) Bill, 2026. Finance Minister Nirmala Sitharaman reiterated that UPI has remained free for consumers since its launch and they will continue to make these instant digital payments without paying any transaction charge.
While consultations with stakeholders are still underway, the timing of implementing the levy has to be decided.
MUST READ: 'Keep UPI free for everybody': Economist says MDR won't affect consumers is 'incorrect logic' Before 2020, the Reserve Bank of India permitted an MDR of 0.40% to 0.90% on the transaction value on debit card payments across all card networks. An MDR of up to 0.30% with a maximum cap of Rs 100 per transaction was applicable on UPI P2M transactions. The zero MDR policy for RuPay debit cards and UPI platforms was only introduced in 2020 to boost the adoption of the digital payment system. However, ever since then, the industry has been seeking a review of the decision, pointing out that they need funds for expansion of digital payments infrastructure. Brazil’s instant payment system called Pix, which started after UPI in November 2020, has over 90% adoption by adults, the source noted, adding that the aim is to make UPI equally popular in the country. Till now, government and ecosystem players have been footing the bill for this, and it has been costing anywhere between Rs 15,000 crore and Rs 20,000 crore. “Ultimately, the system cannot keep footing the bill. It has to be a sustainable model, and this will ensure even faster adoption of UPI and RuPay,” noted the source.
MUST WATCH: UPI MDR Row: John Brittas Vs Nirmala Sitharaman Over Who Will Pay The Charges For nearly 10 years, banks, payment companies, fintechs, NPCI and RBI have collectively invested in technology, cybersecurity, fraud prevention, innovation and customer support to build one of the safest and most reliable payment systems in the world, the Payments Council of India had said recently. Industry has welcomed the move to re-introduce MDR on UPI payments, noting that it will help both customers and businesses. “The government's approach appears designed to strike a balance, keeping digital payments free for consumers and small businesses, while creating a sustainable revenue model for the banks, PSPs, and payment infrastructure providers that power this ecosystem,” said Mehul Mistry, SVP, customer success, strategy and growth, Zeta. Anirban Mukherjee, CEO, PayU noted that payments infrastructure, merchant servicing, security, compliance and fraud prevention require continuous investments. “So does scaling infrastructure, cybersecurity and fraud risk management, and building for what comes next, including agentic commerce, AI-native payments and new ways for merchants to grow,” he pointed out.
Transactions through Unified Payment Interface (UPI) and RuPay debit cards could see a merchant discount rate (MDR) of up to 0.4% as per initial discussions, sources have indicated, but underlined that this will be only on payments above Rs 2,000 to large merchants.
“As per ongoing discussions, the MDR will be in the range of 0.4% but will vary for UPI and Rupay,” said a person familiar with the development, adding that the exact rate is yet to be finalised. However, there will be no impact on consumers, and they will be able to continue using UPI free of cost.
On merchants too, it would apply only on a limited set of transactions, leaving about 96% of transactions unaffected, the source said. “Only 4-5% of the large merchants will be impacted. There is a view that several of them have largely not promoted UPI or RuPay cards over the last five to six years and continue to promote credit cards that have a much higher MDR,” the source noted.
The Rajya Sabha on August 10 passed the Taxation and Other Laws (Amendment) Bill, 2026. Finance Minister Nirmala Sitharaman reiterated that UPI has remained free for consumers since its launch and they will continue to make these instant digital payments without paying any transaction charge.
While consultations with stakeholders are still underway, the timing of implementing the levy has to be decided.
MUST READ: 'Keep UPI free for everybody': Economist says MDR won't affect consumers is 'incorrect logic' Before 2020, the Reserve Bank of India permitted an MDR of 0.40% to 0.90% on the transaction value on debit card payments across all card networks. An MDR of up to 0.30% with a maximum cap of Rs 100 per transaction was applicable on UPI P2M transactions. The zero MDR policy for RuPay debit cards and UPI platforms was only introduced in 2020 to boost the adoption of the digital payment system. However, ever since then, the industry has been seeking a review of the decision, pointing out that they need funds for expansion of digital payments infrastructure. Brazil’s instant payment system called Pix, which started after UPI in November 2020, has over 90% adoption by adults, the source noted, adding that the aim is to make UPI equally popular in the country. Till now, government and ecosystem players have been footing the bill for this, and it has been costing anywhere between Rs 15,000 crore and Rs 20,000 crore. “Ultimately, the system cannot keep footing the bill. It has to be a sustainable model, and this will ensure even faster adoption of UPI and RuPay,” noted the source.
MUST WATCH: UPI MDR Row: John Brittas Vs Nirmala Sitharaman Over Who Will Pay The Charges For nearly 10 years, banks, payment companies, fintechs, NPCI and RBI have collectively invested in technology, cybersecurity, fraud prevention, innovation and customer support to build one of the safest and most reliable payment systems in the world, the Payments Council of India had said recently. Industry has welcomed the move to re-introduce MDR on UPI payments, noting that it will help both customers and businesses. “The government's approach appears designed to strike a balance, keeping digital payments free for consumers and small businesses, while creating a sustainable revenue model for the banks, PSPs, and payment infrastructure providers that power this ecosystem,” said Mehul Mistry, SVP, customer success, strategy and growth, Zeta. Anirban Mukherjee, CEO, PayU noted that payments infrastructure, merchant servicing, security, compliance and fraud prevention require continuous investments. “So does scaling infrastructure, cybersecurity and fraud risk management, and building for what comes next, including agentic commerce, AI-native payments and new ways for merchants to grow,” he pointed out.