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From India Parliament Passes Bill Enabling Merchant Discount Rate on UPI

How could the reintroduction of MDR on UPI affect the Government of India?

Possible What happens if… A possibility worth considering, not a forecast.

MDR debate forces government to balance UPI growth and sustainability The reintroduction of MDR on UPI, enabled by a bill passed by Parliament, forces the Government of India to balance the rapid growth and adoption of digital payments against the need for financial sustainability in the digital payments ecosystem. The government must decide how to structure the charges—such as the proposed 0.02 per cent rate capped at ₹300 for capital market transactions—to ensure the infrastructure remains resilient while protecting small merchants and consumers.

Reported by 5 independent outlets Written Oct 13
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How it reaches Government of India

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The facts so far

As reported. Each one links to where it comes from.

  • A proposed 0.02 per cent merchant discount rate (MDR) on UPI transactions in capital markets could be introduced.thehindubusinessline.com
  • The Taxation and Other Laws (Amendment) Bill, 2026, enables the levy of an MDR charge on UPI transactions.thehindu.com
  • The MDR is capped at ₹300 for capital market transactions.thehindubusinessline.com, indiatimes.com
  • The government has assured the public that they would not have to pay the MDR charge on UPI transactions.thehindu.com

Why it matters

The Government of India is responsible for the stability and evolution of its digital payments infrastructure. The decision regarding MDR determines whether the ecosystem relies primarily on government support or a market-based mechanism, which is critical for future investment in security and innovation.

This debate is driven by the need for financial sustainability. The Department of Financial Services noted that government-backed incentives between FY22 and FY25 constituted only about 11% of the costs incurred by the digital payments industry.

What we don't know yet

  • How will the government clarify the treatment of transfers into a client’s own broking account?
  • Will the government maintain assurances that the general public will not pay the MDR charge?

Is this still moving?

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What would change this answer

The government mandates the MDR be passed directly to consumersThe risk of people reverting to using cash could increase, potentially slowing the growth of UPI transactions.
The government adopts a much lower cap, such as ₹5-10 per transactionThe impact on brokers' margins and the overall cost structure would be mitigated.

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Questions worth asking

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  • About CSDR

    Since the proposed MDR applies specifically to capital market transactions, how might its implementation interact with existing securities regulations like CSDR?

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The full eventIndia Parliament Passes Bill Enabling Merchant Discount Rate on UPI Everything aboutGovernment of India

Brind's analysis is written by AI from the reporting linked above and can be wrong. This explainer is a possibility worth considering, not a forecast: steps marked as Brind's reasoning are not stated in the reporting. It is not investment advice; do your own research.