The Indian government is set to implement a controlled MDR on certain high-value UPI payments within the next two weeks, balancing increased funding needs with consumer welfare.
India is moving closer to allowing merchant discount rates, or MDR, on a narrow slice of UPI payments, with a government notification expected within the next two weeks, according to reports from Zee Business. The Department of Financial Services is likely to issue the gazette notice first, followed by an NPCI circular to set out the operational details. Even so, the exact fee, transaction floor and other parameters have not yet been formally set out.
The broad direction is clear: consumers should not be charged for ordinary UPI use. Business Standard and LiveMint have reported that person-to-person transfers will remain free, while any MDR would apply only to selected merchant transactions above a threshold and at a nominal rate. The government has also said the intent is to preserve the affordability of UPI for everyday users while supporting the payments system’s longer-term funding needs.
That shift comes after a policy change in August 2026, when India amended the Payment and Settlement Systems Act, 2007, to remove the mandatory zero-MDR rule for UPI and RuPay debit cards, according to IndianMarkets.org. The change gives the government room to introduce charges on larger merchants through notifications, though no fee has been imposed yet. The finance ministry has argued that the move would help fund the next phase of UPI’s growth, including technology upgrades, cybersecurity and fraud prevention, as LiveMint has reported.
For merchants, the immediate question is who falls inside the new framework. That remains unresolved until the government publishes the final threshold and the NPCI issues implementation guidance. For now, the clearest message from officials is that UPI payments for consumers will stay free, with any new charge limited, targeted and not applied across the board.
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