Door Opens For Fee On UPI, RuPay Debit Card Payment To Big Merchants, Pg13

Key Highlights:

• The Finance Ministry has initiated steps to allow banks and system providers to impose a fee on UPI and RuPay debit card payments.
• This fee will apply to large merchants with an annual turnover exceeding Rs 50 crore.
• The move aims to address the financial unsustainability of the UPI ecosystem, as highlighted by the Standing Committee on Finance.
• Since January 2020, Merchant Discount Rate (MDR) has been zero for UPI and RuPay debit card transactions to promote digital payments.
• The proposed change involves an amendment to the Payment and Settlement Systems Act, 2007.

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Detailed Insights:

• The zero MDR policy, implemented in 2020, significantly boosted UPI adoption, with transactions reaching ₹29.88 lakh crore in July 2026.
• Despite the growth, the Standing Committee on Finance reported in March 2026 that the absence of MDR made the UPI ecosystem financially unsustainable for payment service providers.
• The proposed amendment seeks to modify Section 10A of the Payment and Settlement Systems Act, 2007, and remove the exemption under Section 269SU of the Income-tax Act, 1961.
• The reintroduction of MDR is intended to cover the operational and infrastructure costs incurred by banks and payment system providers.
• Consumers are expected to remain unaffected by these charges, with the burden falling on the large merchants.
• The government currently provides subsidies through the 'Incentive scheme for promotion of RuPay Debit Cards and low-value BHIM-UPI transactions (P2M)' for small merchants, but this has been insufficient to cover the overall costs of the digital payment infrastructure.
• Industry bodies like the Payments Council of India have advocated for the reintroduction of MDR for large merchants to ensure the long-term viability of the digital payments ecosystem.

Key Concepts Involved:

• UPI (Unified Payments Interface): A real-time payment system developed by the National Payments Corporation of India (NPCI).
• RuPay: An Indian multinational financial services and payment network, conceived and launched by the National Payments Corporation of India (NPCI).
• Merchant Discount Rate (MDR): A fee charged to a merchant by a bank or payment service provider for processing digital transactions.
• Standing Committee on Finance: A parliamentary committee in India responsible for legislative oversight on the policies and decision-making of the Ministry of Finance and other related ministries.
• Payment and Settlement Systems Act, 2007: An Act of the Parliament of India that provides for the regulation and supervision of payment systems in India.