Payments Council Rules Out Consumer MDR; PhonePe & Razorpay Back Free UPI

The Payments Council of India (PCI) has ruled out the reintroduction of the merchant discount rate (MDR) on UPI transactions, reaffirming that UPI payments will remain free for consumers. This decision came after the Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026, which proposes amendments to the Payment and Settlement Systems Act, 2007, enabling the government to prescribe MDR for certain electronic payment transactions.

PCI clarified that any merchant service charges would be commercial arrangements between merchants and payment service providers and would not be passed on to consumers. Finance Minister Nirmala Sitharaman also clarified that MDR would apply only on merchants and not end users, stating that it would support banks and fintechs in investing in infrastructure, innovation, and security.

PhonePe CEO Sameer Nigam and Razorpay CEO Harshil Mathur echoed the PCI's stance, stating that consumers would not be charged for making UPI payments and that small businesses should continue to be protected.

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