The Indian Finance Ministry has firmly denied recent reports claiming the government plans to impose a Merchant Discount Rate (MDR) on UPI transactions, calling them “completely false, baseless, and misleading.” The ministry emphasized its continued commitment to promoting digital payments through UPI.
Understanding the Backstory
The rebuttal comes after media speculation suggested an MDR might be levied on UPI transactions of ₹3,000 and above. These reports indicated the move was intended to support banks and payment solution providers, potentially allowing lenders to charge MDR based on transaction value instead of merchant turnover.
Earlier this year, the Payments Council of India (PCI) had urged the government to reconsider the Zero MDR policy for UPI, which has been in place since January 2020. The PCI highlighted financial sustainability concerns within the digital payments ecosystem. They noted that the government’s ₹1,500 crore allocation to offset operational costs covers only a fraction of the estimated ₹10,000 crore annual cost required to maintain and expand UPI services. To address this, the PCI proposed introducing an MDR for RuPay debit cards for all merchants and a modest 0.3% MDR for UPI, specifically for large merchants.
UPI’s Monumental Growth
Despite the industry’s calls for an MDR, the government’s stance remains clear. This commitment underscores UPI’s pivotal role in India’s digital economy.
Recent data showcases UPI’s explosive growth:
- Dominant Force: For FY 2023-24, UPI accounted for 80% of India’s retail payments, with total transaction volume exceeding 131 billion and value surpassing ₹200 lakh crore.
- Global Leader: On June 1, UPI recorded 644 million transactions, followed by 650 million the next day. This impressive volume has seen UPI surpass global payment giant Visa, which averaged 639 million daily transactions during FY24.
- May 2025 Milestones: UPI hit an all-time high in May 2025, processing 18.68 billion transactions worth ₹25.14 lakh crore. This represents a 4% increase in volume and a 5% increase in value from April 2025.
India’s UPI success positions it as a global leader in real-time payments, contributing a staggering 48.5% of the world’s real-time payment transactions by volume.