UPI today processes nearly 23 billion interoperable payment transactions every month.
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Any electronic mode of payment outside the negative list, notified by the Finance Ministry, will attract Merchant Discount Rate (MDR) and one of them could be unified payment interface (UPI), sources have said. The list will be notified once the Taxation and Other Laws (Amendment) Bill (ToLA) is enacted.Finance Minister Nirmala Sitahraman on Tuesday introduced ToLA Bill in the Lok Sabha. Apart from various provisions, the Bill aims to amend the Payment and Settlement Systems Act, 2007. The amendment prescribes removing the reference of provision of Income-tax Act and also to provide that “no bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment by using one or more electronic modes of payment as may be notified by the Central Government.” Simply speaking, the Bill will enable the government to notify which instruments, category of people making payment, threshold, etc for exemption. However, sources mentioned that nothing has been finalised but they agreed that the enabling provision will lead the way for MDR. MDR is a fee paid by merchants to banks and payments service providers for processing digital transactions. While credit cards in India typically attract an MDR of about 1.5 per cent and debit cards up to 0.9 per cent, UPI transactions are currently free for merchants.Two optionsAccording to reports, the government is considering two options for UPI monetisation: capping free transactions and charging MDR above a set threshold, or levying a fee based on a merchant’s annual turnover. Sources declined to confirm or deny the proposals.UPI today processes nearly 23 billion interoperable payment transactions every month. Looking at the near-zero investment scenario over the last six years, the pace of growth is naturally slowing, even though there is still an opportunity to increase penetration by almost 3x across both consumers and merchants.“For us to get to 90 per cent penetration, and to take UPI global, startups, fintechs, and banks will need to fund this expansion through continued investments in IT, innovation, and cyber security. These costs have increased by almost 300 per cent over the last 12–24 months. While there should be some recovery of these investments, P2P transactions — and charges to consumers —should continue to remain zero,” said Amrish Rau, CEO Pine Labs, in a social media post.Published on August 4, 2026
