India’s Unified Payments Interface (UPI) may introduce targeted merchant discount rates on high-value transactions to sustain its rapidly growing ecosystem, with estimates of unlocking up to Rs 30,000 crore in revenue amidst ongoing debates and policy shifts.
India’s Unified Payments Interface could be moving towards a more selective fee model as policymakers weigh whether targeted merchant discount rates on large transactions can help fund the system’s rising costs without weakening everyday use. A CareEdge Ratings report said such a structure could generate Rs 15,000 crore to Rs 30,000 crore in gross revenue, based on a merchant-fee-addressable pool of Rs 61.13 lakh crore in FY26 and a nominal charge of 0.25% to 0.50% on certain higher-value merchant payments. Consumer payments and person-to-person transfers would remain free under the proposal.
The idea reflects a broader debate over how to sustain the fast-growing payments network, which has become central to retail spending in India. LiveMint reported that the government is considering bringing back MDR, the fee paid by merchants to payment providers, on selected high-value UPI transactions after scrapping it in 2019 to encourage digital payments and reduce cash use. The same report said a parliamentary standing committee has argued that the government’s Rs 2,000 crore support covers only a fraction of the ecosystem’s operating costs and has urged a tiered structure that protects smaller merchants and free person-to-person transfers.
CareEdge senior director Tanvi Shah said the key issue is how any new revenue would be shared across the ecosystem and whether merchants would accept the extra cost. That concern has also surfaced in market commentary, with Bernstein analysts cited by RetailIntel suggesting that any fee would most likely be absorbed by merchants rather than passed directly to consumers. The analysts estimated that payments above Rs 2,000 could account for a small share of transaction volume but a much larger share of total value, making them a logical target for a calibrated charge.
Support for the shift is also emerging from former officials and policy watchers, who argue that the zero-fee model may no longer be enough to finance upgrades, cybersecurity and infrastructure maintenance. A former Reserve Bank of India official quoted by NationPress said small-value UPI payments should stay free, but argued that a sustainable model is needed for the system’s next phase of growth. With UPI now handling billions of transactions and likely to dominate Indian retail payments for years to come, the policy question is no longer whether the network should expand, but how it should pay for itself.
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