Crores of people in the country use UPI for daily shopping ranging from groceries to fruits and vegetables. Now due to the new bill of the government, a debate has started on this. The government has introduced the Taxation and Other Laws (Amendment) Bill-2026 in the Parliament. In this, there is a proposal to change a section (10A) of the Payment and Settlement Systems Act-2007. With this change, a legal path is being prepared to impose MDR (ie Merchant Discount Rate, a type of charge) on certain types of UPI transactions in the future.
The opposition says that this may put a financial burden on the general public. The question is being raised whether in the future, common customers will also have to pay charges for making payments through UPI. However, the government has clearly said that no fee will be charged from general customers on UPI payment. Like before, you will be able to transfer money and make purchases for free by scanning any QR code.
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Why is there debate on the new bill, what are the figures
UPI has become the largest digital payment system in the country, crores of people are dependent on it. According to the latest data, a total of 23.66 billion (i.e. 2366 crore) UPI transactions took place in July. This is the highest monthly figure so far. Moreover, the total value of all these transactions stood at ₹29.88 lakh crore. An average of 76.3 crore transactions took place daily. An average transaction of Rs 96,383 crore took place every day. It is completely free for the people. However, it is dependent on the incentive scheme of the government, that is, it runs with government help.
Under the government's incentive scheme, companies are given cash, tax exemption or other benefits to manufacture things or expand business in the country. Government assistance of ₹3,631 crore was given in the year 2023-24. Apart from this, for the last 10 years, banks, fintech companies, NPCI and RBI have been continuously investing on UPI's infrastructure, cyber security, fraud prevention and new features at their own level. The question is arising that if MDR is implemented, then even if the charge is not imposed on the customer directly, it may in future reach the customers through merchants. Therefore, this change is being said to be a matter related to the pockets of crores of common people. There is opposition to this.
What is MDR and who gives it?
MDR means Merchant Discount Rate, this is the fee that the shopkeeper pays to the bank and payment company in exchange for taking digital payment. This money is not deducted from the customer's pocket, but is paid by the shopkeeper himself. At present this charge on UPI and RuPay debit cards is 0%. In this proposal, MDR of 0.3% to 0.5% can be imposed on UPI transactions of more than Rs 2,000. It is being told that there is a plan to implement this rule only on big merchants/shopkeepers with annual turnover of more than ₹ 1.5 crore. Small traders and vegetable vendors will remain out of its purview. It is also being told that this will not have any impact on small shopkeepers and common customers.
Why is the government making changes?
The Government of India had added Section 10A in this law to promote digital payments. Under this rule, imposition of any kind of MDR on UPI and Rupay card transactions was banned. After the amendment in Section 10A, the government and NPCI will get the right to fix limited charge (MDR) on large transactions, if necessary, so that the cost of digital payment infrastructure can be covered.
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There is no charge on UPI, then who bears the expenses?
There is a dispute over who will bear the expenses of the rapidly growing digital payments network in India. This is considered to be the main root of the entire controversy. In fact, banks and fintech companies say that maintaining infrastructure and cyber security comes at a huge cost. On the other hand, the government wants to make the banks financially strong without putting any burden on the common users, so that the UPI service continues to run without any interruption. At present it is dependent on the incentive scheme of the government, that is, it runs with government help. Banks and payment companies are not able to take money directly from merchants or customers, so the government itself compensates this expense through a special scheme. Apart from this, banks, fintech companies, NPCI and RBI together have been continuously investing in the infrastructure, cyber security, fraud-prevention and new features of UPI.
Now what next?
Recently, after the monetary policy, RBI Governor Sanjay Malhotra said that it is too early to reach any conclusion on this. The government is amending the law and discussions on it are ongoing. He said that someone will have to bear the cost of running the digital payment system. He said that RBI's priority is to ensure that digital payments remain secure, sustainable and affordable for all.
On the other hand, people say that if MDR is implemented, then even if the customer is not charged directly, it may reach the customers through merchants in future. Both the government and RBI have clearly said that no fee will be charged from general customers on UPI payments.