UPI Payments Over ₹3000 May Soon Attract Charges: Government Plans Major Overhaul
New Delhi: The Narendra Modi-led central government is reportedly planning a major revamp of the Unified Payments Interface (UPI) system. According to sources familiar with the matter, a Merchant Discount Rate (MDR) may be reintroduced for UPI transactions exceeding ₹3000. However, smaller transactions — up to ₹3000 — will remain free of any charges. The government may also scrap the ‘Zero MDR’ policy that has been in place since January 2020, which mandated zero fees on merchant transactions.
As per media reports, banks and payment companies are facing mounting challenges. UPI now accounts for over 80% of India’s retail digital transactions. The growing volume of large-value merchant payments has increased operational costs for banks. Since the Zero MDR policy offers no incentive for investment, maintaining free services at such a massive scale is no longer sustainable. Since 2020, UPI merchant payments have crossed ₹60 lakh crore in total value, making cost-free service difficult to continue.
What’s the New Proposal?
The Payments Council of India (PCI) has recommended a 0.3% MDR on high-turnover merchants. Currently, MDR on credit/debit cards ranges from 0.9% to 2% (excluding RuPay cards). RuPay credit cards will remain exempt from this proposed charge. A high-level meeting was held last week involving the Prime Minister’s Office, the Department of Economic Affairs, and the Department of Financial Services to discuss UPI’s future and finalize the MDR framework.
Strengthening the Digital Payments Ecosystem
A final decision will be taken within the next 12 months after consulting banks, fintech firms, and the National Payments Corporation of India (NPCI). The government’s goal is not just to promote UPI, but to make India’s digital payments ecosystem more robust and sustainable in the long run. While free UPI helped India become the global leader in digital payments, the time has come to protect banks and payment providers from financial strain. Introducing small charges on large transactions will help fund infrastructure upgrades and new technologies.
