Govt Opens Door to MDR On UPI, To Amend Digital Payment Rules
In what could likely pave the way for the reintroduction of the merchant discount rate (MDR) on UPI payments, the…
The Union government has opened the door to re-introducing the merchant discount rate (MDR) on Unified Payments Interface (UPI) payments, as it proposes amendments to the Payment and Settlement Systems Act (PSSA), 2007. The proposed rules, to be found in the Taxation And Other Laws (Amendment) Bill, 2026, aim to amend Section 10A of the 2007 Act.
This section currently bars banks and system providers from imposing charges on UPI payments. The new amendments substitute the term "one or more electronic modes of payment" with "one or more electronic modes of payment as the Central Government may, by notification, specify," giving the government the power to directly notify which payment modes will remain exempt from MDR charges.
The proposed rules are expected to be tabled in the Parliament in the coming days. Industry experts welcome the move, arguing that the absence of MDR over the past six years has slowed the growth of the digital payments ecosystem, with investments in infrastructure ballooning almost 300% in the past year.
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