New Delhi: The government is considering a major policy shift that could bring back the Merchant Discount Rate (MDR) on UPI transactions above ₹3,000.

This move is aimed at helping banks and payment service providers cover growing infrastructure and operational costs linked to high-value digital payments, according to a report by NDTV. Since January 2020, UPI transactions have been MDR-free, meaning merchants didn't pay any fee when accepting payments via UPI. While this has fueled massive adoption, UPI now accounts for nearly 80% of retail digital payments, banks and payment companies say the zero-MDR policy limits their ability to invest in better services.

A key meeting to review the MDR structure was held last week with officials from the Prime Minister’s Office, Department of Economic Affairs, and the Department of Financial Services.

Under the proposed changes:

  • No MDR will be charged on small UPI payments.
  • MDR may apply only to larger transactions (above ₹3,000).

The Payments Council of India has recommended a 0.3% MDR on large merchants for high-value UPI payments. For comparison, MDR on card payments typically ranges from 0.9% to 2%, though RuPay credit cards are expected to remain exempt from MDR under the new policy.

Since 2020, UPI person-to-merchant payments have crossed a staggering ₹60 lakh crore, yet the ecosystem has seen little return on that scale of activity, raising sustainability concerns for those maintaining it.