- The government will ask Indian Banks Association to prevent MDR of 0.4% passing to consumers
- The 0.4% MDR may be insufficient to support the UPI ecosystem's operational needs
- The Centre expects the GST Council to take a reasonable stance on GST for MDR charges
The government will ask Indian Banks' Association to devise a mechanism to ensure that merchant discount rate charge of 0.4% is not passed on to consumers, official sources told NDTV Profit on Thursday, September 25.
Official sources further said that the 0.4% MDR may not be sufficient to meet the requirements of the UPI ecosystem. In terms of GST on MDR, centre is hopeful GST Council will take a reasonable view, they added.
The development comes after National Payments Corporation of India (NPCI) managing director and CEO Dilip Asbe said only about 10% of the overall value of UPI transactions could face the risk of charges being passed on to consumers under MDR, with large corporates, which already accept credit cards, absorbing most of the proposed costs.
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"The real risk of consumers getting charged is 10 per cent of the overall value," Asbe said at the 13th SBI Banking & Economics Conclave 2026.
According to him, around 80% of the MDR collected would come from businesses with annual turnover of more than Rs 1,000 crore, which already accept credit cards and pay significantly higher charges. "About 80 per cent of the MDR is collected from the businesses which are doing more than about Rs 1,000 crore per annum," Asbe said.
On September, the government has trimmed the free UPI window by announcing a flat levy of Rs 5 on select transactions worth over Rs 2,000. A fee of 0.4% will be levied on merchant payments above Rs 2,000, but the charge will not exceed Rs 300 per transaction, according to the NPCI.
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