The government is considering re-implementing merchant charges on UPI transactions and RuPay debit cards. The Economic Times has given this information quoting two senior bank officials. Currently, no merchant discount rate (MDR) is levied on these payment methods, as they are provided by the National Payments Corporation of India (NPCI). However, there is a discussion on imposing fees on large merchants while keeping the transactions free for small businesses. Why is the government considering this step? A banker said that banks have submitted a formal proposal to the government. This proposal suggests that MDR should be applicable to those merchants whose annual GST turnover is more than Rs 40 lakh. The government is also planning to introduce a tiered pricing system. Under this system, large merchants will have to pay higher charges. On the other hand, small merchants will have to pay less fees. A banker said, ‘The logic is that if large merchants who have card machines are paying MDR on other payment instruments like Visa and MasterCard debit cards and all types of credit cards, then why can’t they pay charges for UPI and RuPay debit cards?’ How does MDR work and why was it removed? Before 2022, merchants had to pay less than 1% of the transaction amount to banks as MDR or Merchant Discount Rate. However, the government removed these charges in the FY22 budget to promote digital payments. Since then UPI has become the most used payment method and RuPay has also become quite popular. Meanwhile, industry insiders say that large retail merchants make more than 50% of payments through cards on an average. Therefore, a small fee is unlikely to have any major impact on UPI payments. 1,611 crore UPI transactions took place in February February 2025 In 2017, 1611 crore transactions were done through Unified Payment Interface (UPI). During this period, a total amount of Rs 21.96 lakh crore was transferred. The number of transactions has increased by 33% on an annual basis. At the same time, the amount transferred through this has increased by 20%. A year ago i.e. in February 2024, transactions of Rs 18.28 lakh crore were done through 1210 crore transactions. At the same time, till March 3 this month, about 39 lakh UPI transactions were done, through which an amount of Rs 1050 crore was transferred. 5% fewer transactions in February as compared to January There was a 5% decrease in the number of transactions as compared to a month ago i.e. January. In January, people transferred an amount of Rs 23.48 lakh crore through 1699 crore transactions. National Payment Corporation of India (NPCI) regulates UPI.
