[REVISION HISTORY]

India’s UPI Growth and Merchant Fee Debate

Updated 21 times since CLSTR started tracking revisions of this situation.

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2026-08-21 12:57 UTC → 2026-08-24 05:11 UTC · added ~~removed~~

India’s Unified Payments Interface (UPI) continues to process tens of billions of transactions each month, with July 2026 recording about 23.6-23.7 billion transactions worth roughly ₹29.9 trillion. The system now permits RuPay credit-card linkage for QR-code purchases up to ₹1 lakh, while person-to-person transfers and cash withdrawals remain excluded. On 3 August 2026, Finance Minister Nirmala Sitharaman introduced the Taxation and Other Laws (Amendment) Bill, 2026, to Parliament. The bill amends the Payment and Settlement Systems Act to grant the central government authority to notify which electronic payment modes remain exempt from Merchant Discount Rate (MDR) charges, potentially reintroducing fees on UPI. Policymakers have considered an MDR of approximately 0.25-0.5% on payments exceeding ₹2,000 for merchants with annual turnovers above ₹15 million. While such a move would affect only about 5% of transactions, it could impact roughly 65% of total transaction value. By 10 August 2026, Parliament passed the legislation. During Rajya Sabha proceedings, Sitharaman reiterated that the bill is an “enabling provision” and does not currently impose charges on users. The government emphasized that person-to-person (P2P) transfers will remain free and that any future MDR would target specific high-value merchant categories. ~~The final decision regarding any MDR framework will be made by the UPI and Services Steering Committee, led by the National Payments Corporation of India (NPCI).~~ By 12 late August 2026, ~~discussions shifted toward long-term~~ the debate has focused on economic ~~sustainability.~~ sustainability and implementation challenges. The Parliamentary Standing Committee on Finance noted that current government incentives of ₹2,000 crore cover only about 11% of the industry’s estimated ₹20,700 crore operational ~~costs. The committee warned~~ costs, warning that insufficient funding could jeopardize ~~investments in cybersecurity, fraud prevention,~~ cybersecurity and infrastructure. ~~Following~~ Additionally, the ~~bill's passage, industry experts~~ Micro, Small and Medium Enterprises Development (Amendment) Bill 2026 was passed to address structural rigidity and payment recovery delays for MSMEs. Industry experts, including CARD91 CEO Ajay Pandey, have noted that ~~implementing a~~ any selective MDR framework will require ~~robust~~ “robust merchant ~~intelligence.~~ intelligence” and accurate business data to ensure consistent policy application and prevent disputes.

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