Mop-up seen at Rs 15,000 crore: why Govt thinks MDR on UPI is worth it despite backlash

A new levy on UPI transactions is anticipated to generate approximately Rs 15,000 crore from October 15, according to an official familiar with the payment platform. This framework will distribute the revenue among banks, payment apps, and payment service providers. The move follows a long-standing demand from banks and financial institutions, who argue that the infrastructure for UPI requires funding.

The government has been subsidizing payments up to Rs 2,000 for small merchants through its incentive scheme, which was funded at a cost of Rs 8,730 crore between FY22 and FY25. Despite initial denials, the government has now announced the reintroduction of the MDR levy on UPI transactions. Critics argue that such a move could undermine the benefits of digital payments and potentially shift the economy back towards cash. However, officials maintain that this is a step towards a more efficient financial system.