UPI Transaction Fee: Government May Reintroduce Merchant Charges on UPI and RuPay Cards, Know How It Will Affect You

✅ UPI Transaction Fee May Return: Government Plans to Impose Charges on UPI and RuPay Payments

The days of making free UPI and RuPay debit card payments may soon come to an end. According to a recent report, the Government of India is actively considering the re-introduction of Merchant Discount Rate (MDR) charges on UPI transactions and RuPay debit card payments. If implemented, users may have to pay an additional fee while making payments through UPI or RuPay debit cards, especially at large businesses.

The Merchant Discount Rate (MDR), which was waived off in 2022 by the government to promote digital payments, may soon be reinstated. This move, if approved, could impact millions of users and merchants who rely on UPI transactions for day-to-day payments.

✅ What is Merchant Discount Rate (MDR) on UPI?

Merchant Discount Rate (MDR) is the fee that a merchant or shopkeeper has to pay to a bank, payment gateway, or card network for facilitating digital payment transactions.

👉 For example:

• If you make a payment of ₹1,000 through UPI, the bank or payment gateway deducts a small fee (MDR) from the merchant's account.
• This MDR is a source of income for banks, payment gateways, and card networks.

In 2022, the Government of India completely waived off MDR for UPI and RuPay debit card transactions to promote digital transactions. However, now there are discussions about re-imposing MDR on UPI payments, which may significantly affect merchants and customers.

✅ Why is the Government Planning to Reintroduce MDR on UPI Transactions?

According to a report by The Economic Times, the banking industry has formally requested the government to reinstate MDR charges for UPI transactions, especially for large merchants with higher turnover. The primary reasons for this proposal are:

✔ 1. Revenue Loss for Banks and Payment Service Providers

• Since the MDR was waived off in 2022, banks, payment gateways, and card networks have lost a major revenue source.
• Banks have been providing UPI and RuPay services for free without any compensation.
• To balance the operational costs, the banking industry is pushing for MDR reinstatement.

✔ 2. Growing Digital Payment Market

• According to the National Payments Corporation of India (NPCI), UPI transactions crossed 16.11 billion in February 2025, totaling around ₹22 trillion in transaction value.
• With such a high transaction volume, banks are demanding some monetary benefit by reimposing MDR.

✔ 3. Charging Large Merchants

• The government is considering a tiered pricing model where:
  • ✅ Large merchants (turnover above ₹40 lakh/year) will have to pay MDR charges.
  • ✅ Small businesses (turnover below ₹40 lakh/year) will still enjoy free UPI transactions.
• This step is aimed at reducing the financial burden on small merchants while allowing banks to generate revenue from large businesses.

✅ How Much MDR Fee May Be Charged on UPI Transactions?

Although the government has not officially announced the fee structure, according to industry experts, the expected MDR charges could be:

👉 Note: If approved, the MDR fee will not apply to small businesses or personal transactions. However, large businesses will have to bear this fee.

✅ How Will This Affect You as a Customer?

If the government approves MDR charges on UPI transactions, here’s how it will impact you:

🚨 1. Higher Prices at Large Stores

• If you make payments through UPI or RuPay debit card at large shopping malls, supermarkets, or branded stores, the merchant may pass on the MDR fee to you.
• This means you may have to pay extra charges while purchasing groceries, clothes, electronics, etc.

🚨 2. No Extra Charges at Small Shops

• For small shops, local vendors, and small-scale businesses (with a turnover below ₹40 lakh/year), UPI payments will continue to be free.
• This will encourage small businesses to keep using UPI without any financial burden.

🚨 3. Additional Cost for Online Shopping

• If you frequently shop online through UPI or RuPay debit card, you may see higher prices due to MDR fees.
• E-commerce giants like Amazon, Flipkart, Myntra, and Zomato may increase their prices to compensate for the MDR charges.

✅ Why Was MDR Waived Off in 2022?

In January 2022, the Government of India decided to waive off MDR charges on UPI and RuPay debit card transactions to:

• ✅ Promote digital transactions in India.
• ✅ Encourage small businesses to use digital payment systems without any financial burden.
• ✅ Increase financial inclusion.

However, now with increasing UPI usage, the government is re-evaluating the decision to bring back MDR fees.

✅ UPI Transaction Data in India (2025)

According to the National Payments Corporation of India (NPCI), here’s the latest UPI transaction data:

This huge growth in UPI transactions has triggered the banking industry to demand MDR charges again.

✅ What Will Happen Next?

According to media reports, the government is carefully evaluating the proposal and may make the following decisions:

1. ✅ Impose MDR charges on large merchants (Turnover above ₹40 lakh).
2. ✅ Keep UPI free for small merchants (Turnover below ₹40 lakh).
3. ✅ Implement a tiered pricing model where large businesses pay higher MDR fees.

✅ When Will the Final Decision Be Announced?

The government is expected to make a final announcement regarding the re-introduction of MDR charges on UPI and RuPay debit card payments:

• Expected Date: April 2025
• Implementation Date: May 1, 2025 (Tentative)

✅ Final Thoughts

If the government reintroduces MDR charges on UPI and RuPay debit card payments, it will have a significant financial impact on:

• ✅ Large merchants and businesses.
• ✅ E-commerce platforms.
• ✅ Customers making digital payments.

However, small merchants and general users may still enjoy free UPI services without any extra charges.