On Tuesday, the government tabled a Bill in Parliament to amend the Payment and Settlement Systems Act, 2007. Over the last few days, we've seen back-to-back statements from the RBI, the government and almost every major stakeholder in the UPI ecosystem. This time, I think we can all agree that this is not just another legislative update. Otherwise, we wouldn't have seen so much action and so many articles being published across the media.

Here is my detailed take on what this Bill really changes, and more importantly, what it does not.

https://www.youtube.com/watch?v=Al0xtoubHY4

First things first, this Bill does not bring back MDR on UPI or RuPay debit cards. It changes nothing immediately for merchants, banks or payment companies. I know that, within just a couple of days, this line probably already sounds outdated. But that is why I wanted to look beyond the headlines.

Also, for anyone who may have missed our previous stories on this topic, this may be a good starting point. I've tried to capture as much detail as possible, and if you would like to read further, all our previous stories on the subject have now been made free to read.

So, what does the Bill actually do?

It gives the government the power to decide, whenever it wants, whether MDR should apply to digital payment systems, without having to go back to Parliament and amend the law all over again.

And that one change has reopened a debate that has been running since January 2020 – the day the government made UPI "free."

I have been covering this MDR conversation for years now, and almost every aspect of this ecosystem. I've started feeling that this has become something of a quarterly, or at least an annual, ritual where the industry asks the government to bring back MDR.

What I genuinely want to know is which payment companies are actively pushing for these recommendations. Clearly, they are among those most affected by the zero-MDR policy on UPI. But I am also convinced that there may well be a few companies that are perfectly happy with the current system because any formal or capped pricing framework on UPI could actually hurt them more than it helps.

Another important aspect that often gets overlooked is the merchant ecosystem itself.

UPI's merchant base is really two separate worlds living under one network. Millions of small merchants make up nearly 80% of the merchant base but account for only about 20% of the transaction value. On the other side are companies such as Reliance, Amazon, Flipkart, telecom operators and large retail chains — a tiny fraction of merchants that generate nearly 80% of the value. One side negotiates. The other side takes whatever it is given.

So when everyone says, "Bring back MDR, but only for large merchants," it sounds perfectly fair on the surface. But I don't think it is as simple as it is being presented.

What even counts as "large"? A large business? A large transaction? A merchant crossing a certain turnover threshold? Some of these definitions can be gamed.

There's also something nobody is really talking about is that some of the country’s biggest merchants are not just merchants anymore. Reliance now owns a payment aggregator, so does Amazon. Which means if MDR does return, these companies could end up paying it with one hand and collecting it with the other. As for the rest of the large merchant ecosystem, things could quickly return to square one. Payment companies will once again compete aggressively for these merchants, and in India, there is probably no easier way to compete than on pricing.

And then there is a part of this Bill that I think is genuinely underrated. The Bill doesn't just talk about UPI anymore. In-fact, it opens the door to pricing "one or more electronic payment methods." Which technically means the government now has the legal room to think about pricing frameworks for other networks too. Can the government touch international card networks like Visa or Mastercard too? I get into why this could matter for India's ongoing trade negotiations, and why the timing may not be a coincidence.

I've also looked at what happened when the US tried something similar with debit cards over a decade ago – the Durbin Amendment – and whether it actually helped the merchants it was meant to help.

Fun fact: Not really, and definitely not evenly.

I have put the whole breakdown in this video — the economics, the loopholes, who actually wins if MDR returns, and why the government might be playing a longer game than just UPI.