PCI Proposes MDR on UPI and RuPay Transactions
The Payments Council of India (PCI), a representative body of digital payment service providers, has proposed the introduction of a 0.30% Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions conducted by large merchants. MDR refers to the fee paid by merchants to banks and payment facilitators for processing digital transactions. This recommendation is aimed at creating a sustainable revenue stream to maintain and expand the digital payments infrastructure.
Impact on Small vs. Large Merchants
Under the proposal, merchants with an annual turnover exceeding ₹20 lakh would be subject to the MDR, while approximately 90% of India’s UPI-accepting businesses—classified as small merchants with turnovers below ₹20 lakh—would remain exempt. The tiered approach ensures that the majority of micro and small businesses continue to accept digital payments at zero cost, preserving financial inclusion while asking larger enterprises to contribute to backend costs.
MDR Structure for RuPay Debit Cards
In addition to the UPI proposal, PCI has also suggested implementing an MDR for RuPay debit card transactions across all merchant categories. This measure would bring RuPay in line with other global card networks that already operate under a standardized fee structure. PCI believes that this change would help level the playing field and incentivize wider usage and acceptance of RuPay cards.
Sustainability and Need for Funding
The absence of MDR on UPI has raised concerns about the long-term financial viability of the digital payments ecosystem. PCI has estimated that maintaining the UPI infrastructure requires around ₹10,000 crore annually. While the government allocated ₹1,500 crore for UPI promotion in the financial year 2025, this marks a significant reduction from the previous year’s ₹3,268 crore allocation, leaving a considerable funding gap.
Industry experts argue that a nominal MDR on large merchants would not only address this gap but also support enhancements in cybersecurity, innovation, dispute resolution mechanisms, and customer support services. The council emphasized that large businesses already pay MDRs ranging from 1% to 2% on card transactions, making a 0.30% MDR on UPI both practical and affordable.
The proposed move seeks to establish a fair and scalable model for digital payments in India, striking a balance between accessibility for small businesses and financial sustainability for service providers.
