The Centre has proposed changes to the law that could allow merchant charges on certain UPI transactions in the future. If approved, high-value payments above ₹2,000 made to large businesses could be the first to attract a Merchant Discount Rate (MDR), while consumers are expected to remain unaffected, according to sources.
The proposal is part of the Taxation and Other Laws (Amendment) Bill, 2026, introduced in the Lok Sabha on Tuesday. The Bill seeks to amend provisions of the Payment and Settlement Systems (PSS) Act, 2007, removing the current legal restriction that prevents banks and payment system providers from levying certain charges on electronic payment modes.
Sources said there is currently no timeline, final decision, or implementation framework for the proposal.
According to estimates shared by sources, transactions above ₹2,000 account for only 5% of all UPI transactions but contribute nearly 65% of the total transaction value. If implemented, the proposed change is unlikely to affect routine low-value payments such as purchases of milk, vegetables, groceries, or payments for auto-rickshaws and taxis.
Data from the National Payments Corporation of India (NPCI) shows that UPI processed 23.66 bn transactions worth nearly ₹29.9 lakh crore in July.
Industry experts believe the proposal could mark a significant shift in India’s digital payments ecosystem. While no fee structure has been approved yet, the amendment could create the legal framework needed to reintroduce MDR on select UPI transactions.
The payments industry has long advocated for the return of MDR, arguing that it would help build a more sustainable revenue model for banks and payment service providers while supporting the long-term growth of the country’s digital payments ecosystem.
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