Parliament’s Standing Committee on Finance urges India to implement a tiered merchant discount rate for higher-value UPI transactions, citing financial sustainability concerns amid rising infrastructure costs and limited government support.
Parliament’s Standing Committee on Finance has urged India to move towards a tiered merchant discount rate, or MDR, on higher-value UPI payments, arguing that the current funding model leaves the digital payments network under strain. In a report dated March 2026, the committee said the government’s ₹2,000 crore support package covers only about a tenth of the industry’s operating costs, which it pegged at ₹20,700 crore.
The panel’s case is that India’s payments infrastructure has outgrown a system built around near-free transactions. According to the report, the zero-MDR regime has placed pressure on the ecosystem’s finances and limited the money available for cybersecurity, fraud controls and network upgrades. It has now recommended a self-sustaining structure that would apply charges mainly to larger merchant transactions while protecting small businesses and person-to-person transfers.
This is not the first time lawmakers have raised concerns about the long-term economics of UPI. In 2022, a parliamentary committee had already asked the government to reconsider the zero-MDR policy and to consult widely with the National Payments Corporation of India, banks and payment service providers. The latest report goes further by saying legislative provisions for a tiered MDR model have now been introduced and should be notified without delay.
The committee also wants the transition handled carefully so that everyday users are not discouraged from digital payments. It has said the framework should shield small merchants and personal transfers, even as it seeks to make the wider ecosystem financially viable. The report argues that if support remains inadequate, investment in payment rails, security and fraud prevention could suffer, slowing the next phase of digital adoption.
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