Business & Economy
Government Weighs Tiered UPI Charges For Large Merchants
Will a narrow MDR return cover costs while keeping small merchants free?
Will a narrow MDR return cover costs while keeping small merchants free?
India’s zero-fee model is under pressure as the government weighs whether should begin paying a small charge to help fund the system’s growing costs. The debate turns on who should bear the burden of , with banks, and industry groups arguing that some cost recovery is needed while the state has so far kept small businesses and consumers protected.
As of the latest reports, the proposal to reintroduce MDR on some UPI payments is still under consideration and has not been finalised. The reported decision chain involves the , , and the , and if approved the change would mark a major shift from UPI’s current for large merchants.
Economic Times reported that the proposed MDR would likely be set at 5 to 7 if reintroduced for large merchants. That is far below the earlier suggestions discussed by industry groups, indicating the government is trying to keep the cost light while allowing some revenue recovery for the .
Later reports said the government was examining a narrower proposal that would apply only to large merchants with of about ₹1 crore to ₹1.5 crore. The same reports said the would apply only to UPI transactions above , while consumers and small merchants would stay outside the charge.
In March 2026, a pushed for a for , backing the idea that large merchants could be charged while smaller users remained protected. This added legislative weight to a proposal that had previously been driven mainly by industry lobbying and executive-level discussion.
A government document said all transactions by large merchants would still carry , underscoring that no had been approved at that point. The statement reinforced the official free-to-user policy even as industry pressure for a charge continued to build.
reported that Indian authorities were keen to allow a fee on large-merchant UPI transactions, with the Payments Council of India, banks and the central bank all pushing the government on the issue. also said the finance ministry was supportive, while the final decision could rest with the Prime Minister’s Office, showing the matter had moved into .
The wrote to the asking for MDR to be restored on UPI purchases by large merchants only. The industry group reportedly proposed about for merchants above a , arguing that payment providers and banks needed a way to recover costs from the fastest-growing users of UPI.
NPCI chief said may eventually pay a “reasonable” fee on UPI transactions, while would remain exempt. He said the timing was unclear, but his remarks marked an early public acknowledgment that UPI’s free model might not be permanent for every business segment.
NPCI introduced an on UPI merchant payments made through , such as wallets, for transactions above . The move did not change the for standard bank-funded UPI, but it showed the system could support differentiated charging for some payment types and merchants.
India’s Finance Ministry removed merchant discount rate charges on standard transactions, making bank-to-bank payments free for users and merchants under the new policy framework. This created the that later became central to the debate over who should pay for ’s .