Finance Ministry Considers MDR on High-Value UPI Transactions

Gist The Ministry of Finance is reviewing a proposal to reintroduce the Merchant Discount Rate MDR on select high-value transactions or deploy a tiered incentive structure to phase out government subsidies. This assessment follows concerns raised by the Parliamentary Standing Committee on Finance regarding the financial unviability of operating the Unified Payments Interface UPI purely on limited state funding. Background To accelerate digital financial inclusion, the Centre implemented a zero-MDR policy on January 1, 2020, removing processing charges for UPI and RuPay debit card payments. The government subsequently introduced an incentive scheme to compensate service providers for facilitating low-value transactions at small retail outlets. However, this state funding has fallen significantly short of actual industry processing expenses, prompting discussions on transitioning the ecosystem to a commercially viable model. What is MDR The Merchant Discount Rate MDR is the commission paid by a merchant to banks, network providers, and payment gateways for facilitating digital transactions. While standard for credit cards and conventional debit instruments, the Centre waived this fee for UPI and RuPay networks to drive mass digital adoption. India's Achievements…