Government introduces Bill to enable future changes to MDR on UPI, RuPay debit cards
04 Aug 2026, 06:28 PMThe proposed amendment, tabled by FM Nirmala Sitharaman, marks a shift from the existing legal framework, under which UPI enjoys a statutory exemption from MDR.
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The Centre on Tuesday introduced a bill in Parliament seeking to amend the Payment and Settlement Systems Act, 2007, a move that would give the government the power to decide whether merchant discount rate (MDR) should apply to one or more electronic payment modes in the future.
The proposed amendment, tabled by Finance Minister Nirmala Sitharaman, does not impose MDR on UPI or any other payment system immediately. Instead, it creates a legal framework that would allow the government to notify, through rules, which digital payment modes should remain exempt from MDR and which could attract them.
MDR is the fee a merchant pays to payment aggregators and banks for processing digital transactions.
The amendment marks a shift from the existing legal framework, under which UPI enjoys a statutory exemption from MDR. If passed, the government will have the flexibility to revisit that exemption in the future without requiring another amendment to the law.
In January 2020, the government had barred banks and payments firms from levying MDR on UPI and RuPay debit card transactions in order to push digital payments. UPI, which was launched in 2016 by NPCI, accounts for close to 90% of all digital transactions in India. In July 2026, UPI hit a new record processing 23.66 billion transactions worth Rs. 29.88 lakh crore.
The debate around restoring MDR has gained momentum in recent years, with the industry making several representations to the government to reintroduce MDR on UPI, at least for large merchants.
In its report submitted earlier this year in March, the Parliamentary Standing Committee on Finance stated that the zero-MDR policy had accelerated UPI adoption, but at the same time the absence of MDR has made the UPI ecosystem financially unsustainable.
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