Govt may bring back merchant charges on UPI and RuPay-powered debit cards: Report

The government may be considering bringing back merchant charges on transactions made using Unified Payments Interface (UPI) and RuPay-powered debit cards.

However, this is for large merchants whose GST-based annual turnover is over ₹40 lakh, according to an Economic Times report.

HT.com has not independently verified the information.

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These charges, also known as merchant discount rates (MDR), are paid by the merchant to the bank for processing payments in real-time.

The proposal comes on the back of the logic that the merchants with card machines are already paying MDR on debit and credit cards from Visa and Mastercard, so they can do so for UPI and RuPay debit cards too.

However, there was an MDR to be paid before the financial year 2021-22. After that, the government withdrew the fee to encourage digital transition. However, UPI has now become a de-facto retail payment mode and RuPay has also gained popularity.

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This also comes at a time when industry players say that providing UPI free of cost causes major revenue loss for them, despite the government offering a subsidy to banks and fintechs for processing these payments free of charge since they were insufficient, according to the report.

On top of this, the government has also reduced its payments subsidy allocation in the Union Budget 2025 to ₹437 crore from more than ₹3,500 crore a year ago, according to the report.

The government may also bring a tiered pricing on UPI, depending on the size of the merchant.

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The larger ones may pay a higher charge and the smaller ones a lower one.

Despite this, UPI will continue to be free for merchants with annual turnover of less than ₹40 lakh, according to the report.