A parliamentary panel has suggested the reinstatement of the merchant discount rate (MDR) on UPI transactions to ensure financial sustainability for fintech companies facilitating these services. The Standing Committee on Finance highlighted that the absence of MDR creates financial pressures on the government and hampers ecosystem investment in long-term infrastructure.
The committee stressed the importance of establishing a viable revenue model to support the UPI ecosystem’s financial sustainability without overburdening government finances. MDR, a fee paid by merchants for digital transaction processing, was eliminated on Person-to-Merchant (P2M) UPI transactions in 2020. Industry bodies like the Payments Council of India have advocated for the reinstatement of MDR on UPI payments to enable ecosystem players to generate direct revenue.
The governmental allocation of ₹2,000 Cr in the Union Budget 2026-27 for promoting RuPay debit card transactions underscores the ongoing efforts to incentivize digital payments. The debate over MDR on UPI transactions highlights the necessity of striking a balance between fostering financial sustainability and incentivizing digital transactions within the fintech landscape.
Source: Inc42 Media