- The Lok Sabha also passed a Bill that removes the legal barrier preventing the government from allowing MDR on certain digital payments, including UPI. However, this does not mean that UPI payments above ₹2,000 on Google Pay, Paytm, PhonePe or other apps have become chargeable for users.
- What is MDR? Merchant Discount Rate is a fee charged to a merchant for accepting a digital payment. It is generally paid to banks or payment-service providers, not directly by the customer.
- Are UPI users being charged now? No. As of 7 August 2026, there is no general charge imposed on customers simply because a UPI payment exceeds ₹2,000.
- Why is ₹2,000 being discussed? Earlier government incentive schemes treated small merchant UPI transactions up to ₹2,000 differently for reimbursement purposes. That threshold should not be confused with a direct customer charge.
- What changed in Parliament? The Bill passed by the Lok Sabha gives the government greater legal flexibility to permit MDR on UPI or other specified digital-payment transactions in the future. It does not itself fix an MDR rate.
- Who would bear MDR? The Finance Minister stated on 6 August 2026 that MDR, if introduced, would be imposed on merchants rather than consumers.
- Why consider MDR? Banks and fintech companies incur costs for payment infrastructure, cybersecurity, fraud prevention and transaction processing. MDR could provide revenue to support these services.
- Important clarification: A merchant could indirectly adjust prices to recover higher payment costs, but that is different from Google Pay, Paytm or another UPI app directly charging the customer a fee for every transaction.
Question:
Q1. If MDR is introduced on UPI under the proposed framework, who is expected to bear the charge directly?a) UPI customer
b) Merchant
c) RBI
d) NPCI
Answer: b) Finance Minister Nirmala Sitharaman clarified on 6 August 2026 that MDR is a merchant-side charge, not a direct charge on customers using UPI.
