Report: UPI MDR May Be Set At 40 Bps; Banks Could Receive Largest Share
A report suggests India may set a merchant discount rate (MDR) for select UPI transactions at 40 basis points. Issuing banks are reportedly set to receive the largest share of this fee.
India's government may soon establish a framework for levying a merchant discount rate (MDR) on certain Unified Payments Interface (UPI) transactions, with the fee potentially set at 40 basis points, or 0.4% of the transaction value, according to an Economic Times report.
Under the proposed structure, issuing banks could receive 40% of the MDR. The remaining fee would be divided equally between third-party app providers (TPAPs) like PhonePe and Paytm, and acquiring banks, with each receiving 30%.
The debate over MDR has resurfaced as UPI has become India's dominant digital payments system. Banks and payment companies rely heavily on government incentives to cover transaction processing costs, a system introduced in 2020 to boost digital payment adoption.
The Finance Ministry has clarified that consumers will not be charged for UPI payments and person-to-person transactions will remain free. The final MDR framework is still pending notification, expected in the coming weeks.