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India moves to restore UPI merchant fees after six-year zero-MDR policy

India moves to restore UPI merchant fees after six-year zero-MDR policy

Parliamentary changes would let the government later levy fees on some UPI payments, while the RBI's pilot e-rupee remains fee-free and outside the MDR debate.

Fact Check
Reuters confirms India tabled amendments to the Payment and Settlement Systems Act creating a legal basis for MDR on UPI, with a proposed 0.3-0.5% fee on transactions over INR 2,000 for larger merchants. CryptoBriefing corroborates the amendment and notes MDR was banned since Jan 2020 (roughly six years to 2026), consistent with the 'six-year zero-MDR policy' framing. The e-rupee's fee-free status is inherent (no intermediary MDR), as explained in the Digital Rupee source. The framing 'would let the government later levy fees' matches Reuters' note that specific rates and applicability are still under review. Minor uncertainty remains because the enabling amendment is proposed, not yet enacted, so fees are not yet operationally 'restored.'
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Summary

India has introduced legislation that would remove the legal barrier preventing merchant fees on some Unified Payments Interface transactions, setting up a possible return of merchant discount rate charges after the zero-MDR policy adopted in 2020. Finance Minister Nirmala Sitharaman introduced the Taxation and Other Laws (Amendment) Bill, 2026 in the Lok Sabha on August 4, amending Section 10A of the Payment and Settlement Systems Act, 2007. The bill does not itself impose charges, but it would allow the government to decide later which payment categories remain free and which may carry fees. One proposal cited by Reuters would apply a 0.3% to 0.5% fee on UPI payments above ₹2,000 for larger merchants with annual turnover above ₹1.5 crore, while smaller payments and person-to-person transfers would stay free. The debate has quickly turned political, with Congress attacking the plan, while the government says no fee has been imposed and regular users and small merchants are expected to remain unaffected. The issue has also drawn attention to the RBI's digital rupee, or e-rupee, which remains in pilot and, according to the central bank's FAQ updated on April 29, 2026, carries no charges for users or wallets. Unlike UPI, which transfers money between bank accounts, the e-rupee is central bank-issued digital money held in a wallet. It can be used on the same UPI QR codes, but adoption remains limited, with about 10 million users and more than 150 million total transactions so far, far below UPI's 23.6 billion transactions worth ₹29.9 trillion in July alone.

Terms & Concepts
  • Merchant Discount Rate: A fee a merchant pays to a bank or payment provider for accepting digital payments.
  • CBDC: A central bank digital currency, which is digital money issued directly by a country's central bank.
  • e-rupee: India's RBI-issued digital rupee, currently being tested in pilot form through wallet-based payments.