UPI MDR to Apply Only Select Merchant Transactions, if Implemented: Centre

The government has clarified that as and when MDR charges are introduced, they will apply only to a limited set of merchant transactions, above a certain threshold. These charges will also be at a nominal rate, far lower than debit or credit MDRs. 

Moreover, consumers making payments will not face any transaction charges, and all person-to-person (P2P) transactions will continue to be free of charge. 

“Once the Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, which proposes to amend Section 10A of the Payment and Settlement Systems Act, 2007, the “UPI and Services Steering Committee” headed by NPCI will decide on the MDR, if any,” the government said in a statement. 

The clarification comes in the wake of concerns over possible changes to the current UPI-MDR regime following the amendment to the Payment and Settlement Systems Act (PSS Act).

The ministry also explained that the amendment is a rather “enabling provision” aimed at UPI’s long-term sustainability, technological advancement and, and resilience against emerging risks. 

It also highlighted that the UPI has grown immensely in recent years with exponential transaction volumes. This has resulted in the need for continuous upgrades to the system. 

Just to put things into perspective, in July 2026 alone, UPI processed 23.66 billion transactions worth INR 29.88 lakh crore (nearly USD 313.47 billion).

The government also hopes the move will help more companies expand operations, which will require a self-sustaining revenue model.  Also, reliance on subsidies is not going to be viable for the next wave of growth of UPI. 

“Some of the media reports have suggested that external influences may be driving policy changes. This is unfounded, completely false and misleading. If external pressure had been a factor, the government would not have introduced UPI in 2016 or made it free of charge for both merchants as well as citizens since January 2020 and ensured that it became the world’s largest real time interoperable payment system,” it added.