Government Considers Introducing Charges on UPI Transactions Above Rs 3,000

Last Updated Jun - 11 - 2025, 04:03 PM | Source : Fela News

Government plans to impose Merchant Discount Rate (MDR) on UPI payments exceeding Rs 3,000 to address rising transaction costs, signaling a potential end to the

The government is reportedly contemplating the reintroduction of charges on Unified Payments Interface (UPI) transactions exceeding Rs 3,000, aiming to ease the financial burden on banks and payment service providers. Since January 2020, UPI transactions have benefited from a zero Merchant Discount Rate (MDR), encouraging widespread adoption of digital payments. However, with increasing concerns over the rising costs of managing high-value digital transactions, officials are exploring a shift towards a value-based MDR system. Sources indicate that smaller payments will likely remain exempt, while larger transactions may soon attract fees to ensure the sustainability of the payment infrastructure.

UPI currently dominates the retail digital payments market in India, accounting for nearly 80 percent of all transactions. Despite its success, the zero-MDR policy has limited the incentive for banks and payment firms to invest further in the digital ecosystem. The Payments Council of India has suggested a 0.3 percent MDR on high-value UPI transactions for large merchants, which is considerably lower than the MDR rates on credit and debit card payments, which range between 0.9 and 2 percent. Notably, RuPay credit card transactions are expected to continue being exempt from MDR charges under the new proposal.

The government is expected to make a final decision on the MDR policy for UPI transactions within the next two months after consultations with key stakeholders, including banks, fintech companies, and the National Payments Corporation of India. Should the change be implemented, it will mark a significant policy shift from promoting UPI adoption through zero charges towards ensuring the long-term financial viability of the country’s digital payment infrastructure. This move is seen as necessary to maintain efficient service delivery amid growing transaction volumes and costs.