'Tax maximisation' or a 'much-needed step'? Verdict split on UPI MDR

UPI MDR has sparked a debate among major fintech players, with some calling it necessary for sustainability while others question the cost burden on merchants and businesses

The introduction of a Merchant Discount Rate (MDR) on select UPI transactions has triggered a debate among leaders in the payment and fintech industry over the cost of running the network, its long-term sustainability and the burden on merchants.

While some industry executives have backed the move as necessary to create a sustainable revenue model for UPI, others have questioned the charge and raised concerns about how it will affect specific businesses.

The new framework will take effect from October 15. The National Payments Corporation of India (NPCI) has prescribed an MDR of 0.4 per cent on person-to-merchant (P2M) UPI transactions above ₹2,000, capped at ₹300 for transactions of ₹75,000 or more.

P2P transactions will remain free. P2M transactions up to ₹2,000 will also remain free, while small P2PM merchants receiving up to ₹1 lakh a month through UPI will not pay MDR. The fee will be distributed among participants in the payments chain rather than going to the government.

Who's against it?

Former BharatPe Managing Director Ashneer Grover has called the UPI MDR “a revenue maximisation strategy”.