Legislation may introduce merchant charges on some UPI transactions, ending a four-year zero-fee policy to fund network expansion.
India’s government has introduced legislation to allow fees on select UPI transactions, aiming to create a sustainable funding model for the payments network. The move would end the zero-merchant-discount-rate (MDR) regime, in place since 2020, which waived charges to boost adoption of the state-backed system.
UPI processed 23.66 billion transactions worth ₹29.88 trillion ($313.4 billion) in July, reflecting its rapid growth. Banks and fintech firms have argued that the zero-fee policy is unsustainable as infrastructure costs rise, despite government incentives covering operational expenses.
The proposal follows years of debate among regulators, banks, and payment companies over funding UPI’s expansion. Industry leaders have called for a revenue model to support investments in technology, security, and global expansion.