Rs 15,000 crore: What the UPI levy will fetch, and why the govt is backing it, Pg17

Key Highlights:

• A 0.4% Merchant Discount Rate (MDR) will be levied on Unified Payments Interface (UPI) transactions above Rs 2,000 made to merchants, effective October 15.
• This new framework is projected to generate approximately Rs 15,000 crore, to be shared among banks, payment apps, and payment service providers.
• The government had previously subsidized digital payments up to Rs 2,000 for small merchants, spending Rs 8,730 crore between FY22 and FY25.
• The reintroduction of MDR marks a shift from the zero-MDR regime implemented in January 2020 to promote digital transactions.
• Transactions exceeding Rs 2,000 account for 4% of the volume but 67% of the total value of merchant payments.

Detailed Insights:

• The MDR is a fee paid by merchants to entities that facilitate digital transactions, covering the costs of payment infrastructure.
• The zero-MDR policy, introduced in January 2020, applied to RuPay Debit Card and BHIM-UPI transactions.
• This policy was enacted through amendments in Section 10A of the Payments and Settlement Systems Act, 2007 and Section 269SU of the Income-tax Act, 1961.
• The move aims to ensure the sustainability of the digital payments ecosystem by providing revenue to service providers.
• Despite previous denials, the government has now opted for a partial reintroduction of MDR to support the financial players.
• UPI processed 2,451 crore transactions worth Rs 29.9 lakh crore in August 2026, highlighting its significant role in the Indian economy.

Key Concepts Involved:

• Unified Payments Interface (UPI): An instant real-time payment system developed by National Payments Corporation of India (NPCI).
• Merchant Discount Rate (MDR): A fee charged to merchants by banks for processing debit and credit card transactions.
• National Payments Corporation of India (NPCI): An umbrella organization for operating retail payments and settlement systems in India.
• RuPay: An Indian multinational financial services and payment service system, conceived and launched by NPCI.