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Informist, Tuesday, Sept. 15, 2026

NEW DELHI – The finance ministry Monday notified that banks cannot levy any charge on unified payments interface transactions up to INR 2,000 and on RuPay-powered debit cards. "No bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment by using the electronic modes of payment specified in paragraph above," the Department of Financial Services said in a gazette notification.

This essentially simplifies the architecture to impose charges on digital payments, allowing banks to impose a merchant discount rate on high-value digital transactions. The merchant discount rate, commonly called MDR, is a fee a merchant pays to a bank to process digital payments through credit cards, debit cards, or unified payment interfaces.

The government had originally made digital payments free from January 2020 to boost digital adoption. In August, however, Parliament passed a bill allowing the government to restore the merchant discount rate on digital transactions. The government had, in August, amended the Payment and Settlement Systems Act, 2007, as part of the larger amendments linked to the Income Tax Act.

To be sure, the Reserve Bank of India has already confirmed that the merchant discount rate is imminent. Central bank Deputy Governor Shirish Chandra Murmu said last month that the National Payments Corp. of India will make the announcement for the quantum of fee to be levied on the merchants. "I will not hazard a guess, but it will come definitely now that we hear," Murmu had said on being asked about the details on the rollout of merchant discount rate. "The government, RBI, and NPCI have been discussing (on the matter)," the deputy governor had said, adding that the finer details on its implementation "have to be worked out".

The conversation regarding a merchant discount rate gained steam after RBI Governor Sanjay Malhotra said last year that at present, the government subsidises banks and other fintech ecosystem stakeholders to keep UPI transactions free. However, the subsidised model may not be sustainable in the long run. He had said that the cost of running the interface reliably will have to be borne by either the users or the ecosystem collectively to ensure its viability. 

"As of now, there are no charges. The government is subsidising various players such as banks and other stakeholders. Obviously, some costs have to be paid. Someone will have to pay for it if the service is to be genuinely sustainable," Malhotra had said at an event. 

UPI transactions have surged in the last few years. The value of UPI transactions carried out in August totalled INR 29.82 trillion, compared with INR 30.0 million in August 2016.  End

Reported by Priyasmita Dutta

Edited by Akul Nishant Akhoury

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