The demand to introduce a merchant discount rate (MDR) on Unified Payments Interface (UPI) transactions is growing louder with the Startup Policy Forum (SPF) becoming the latest industry association to endorse the Payments Council of India's (PCI's) proposal.
PCI, a representative body of digital payment players, has called for a 0.3 per cent MDR on transactions made through UPI at large merchants in a letter to the prime minister's office this week.
It has also sought to introduce an MDR structure on RuPay debit card transactions applicable to merchants of all sizes.
MDR refers to a fee that merchants pay banks or financial technology (fintech) companies processing payments for executing a transaction.
At present, banks and fintech companies bear the payment processing costs incurred to execute transactions made on the real-time payment system.
"SPF wholeheartedly supports the recent industry proposal to introduce an MDR on UPI transactions for large merchants," the association said in a statement.
Associations are amping up their demand for an MDR in the backdrop of the Centre cutting down subsidies to promote UPI and RuPay debit card transactions.
In 2024-2025, the government approved Rs 1,500 crore in a scheme for the promotion of low-value BHIM-UPI transactions when made from peers to merchants. This was a substantial cut from the Rs 3,268 crore approved in 2023-2024.
PCI had stated that the allocation, amounting to Rs 1,500 crore, covered only a fraction of an estimated Rs 10,000 crore annual cost required to maintain and expand UPI services.'
"The two-tiered model of MDR ensures balance by exempting small merchants from the proposed MDR framework and preserving the extant zero MDR framework for them," SPF added.
PCI's proposal implies that a 0.3 per cent MDR structure on UPI would only affect large merchants who can bear a nominal transaction processing cost.
-- Ajinkya Kawale, Business Standard
© 2026 Rediff.com - Investor Information - Advertise with us - Disclaimer - Privacy Policy - Sitemap - Feedback - About us - Terms of use - Grievances
