Any move to allow MDR on UPI payments above Rs 2,000 could be setback for MSMEs: ASSOCHAM's Sanyal
New Delhi, August 6
Amid reports that government may allow Merchant Discount Rate on Unified Payments Interface transactions above Rs 2,000 to businesses, Saurabh Sanyal, Secretary General of ASSOCHAM, has said that it could prove to be a setback for micro, small and medium enterprises as the additional transaction cost may increase their financial burden and discourage digital payments.
"MDR is going to be a setback for smaller businesses because MDR is basically a fee on digital transactions. As of today, the discussions are that it could be around 0.25 to 0.5 per cent on transactions above Rs 2,000. For MSMEs, which undertake a large number of digital transactions, this will become a significant additional cost. It will create turbulence in their digital financial transactions," Sanyal told ANI on the sidelines of ASSOCHAM's third FinTech Festival in New Delhi.
The Lok Sabha on Thursday passed the 'Taxation and Other Laws (Amendment) Bill, 2026 ', which seeks to amend the Payment and Settlement Systems Act, 2007, Income-tax Act, 2025, and Finance Act, 2026.
The Bill, moved by Finance Minister Nirmala Sitharaman for passing, was approved by voice vote without discussion amid protests by opposition members over their demands related to police action against protestors on July 20.
It proposes a series of tax changes aimed at boosting investment, supporting manufacturing, providing tax certainty and will replace the Income-tax (Amendment) Ordinance, 2026.
The bill empowers the government to levy MDR on one or more electronic modes of payments, including UPI.
The government may allow levying Merchant Discount Rate (MDR) of 0.25% to 0.4% on UPI transactions above Rs 2,000 made to businesses. The person-to-person (P2P) payments, however, are not likely to be affected.
Sanyal said MSMEs should continue to remain outside the ambit of such charges, while larger businesses undertaking high-value transactions may be in a position to absorb them.
"It should be free for the MSMEs. For the larger businesses, for any transaction beyond Rs 1 crore, one can expect MDR because they are already paying such charges through banking channels and even for overseas transactions. But for the MSMEs, it is not desirable as of today," he said.
Sanyal said the third edition of ASSOCHAM's FinTech Festival has attracted more than 1,000 registrations and has brought together policymakers, regulators, fintech companies and industry leaders to deliberate on the future of financial technology in India.
Highlighting India's rapid digital transformation, Sanyal said the country records around 22 billion digital transactions in a month, making it one of the world's leading digital payment ecosystems.
"We are the country with the maximum number of digital transactions. This digital transformation is taking place under the guidance and stewardship of Prime Minister Narendra Modi. It is making banking and financial transactions increasingly paperless, allowing people to transfer funds from one place to another instantly with minimum effort," he said.
Speaking about the fintech industry's expectations from the government, Sanyal said the sector is seeking a fully paperless and digitally enabled financial ecosystem with minimal dependence on intermediaries.
"The demand for fintech is that we should be 100 per cent digitally recognised. We should do all our transactions paperless and there should be no interference of a third party or a mediator because that stops the leakages which are currently happening," he said.
He said wider adoption of fintech could also strengthen transparency in financial transactions and help address financial crimes.
However, Sanyal maintained that any measure that leads to increase in cost of digital payments for MSMEs could slow the country's progress towards a fully digital financial ecosystem.
"Policies like MDR will delay this process of becoming 100 per cent digital. Digital payments should remain affordable for MSMEs, which are among the biggest adopters of digital transactions," he added.
— ANI
Reader Comments
As a small business owner, I completely agree with ASSOCHAM's concerns. The government should understand that UPI was supposed to be a free and accessible digital payment option for all. Adding MDR will only push people back to cash payments, which defeats the whole purpose of digital India. 🙏
I understand the need for MDR on big-ticket transactions like Rs 1 crore+, but taxing everyday UPI payments above Rs 2000 seems counterproductive. If they really want a digital economy, they should keep it free for MSMEs. Larger businesses can bear the cost, but street vendors and small shops can't.
I think we need to look at this from a balanced perspective. While MDR might be a challenge for MSMEs, some transaction costs are inevitable to sustain the digital payment ecosystem. However, 0.25-0.4% on Rs 2000+ is quite high for small shops. Maybe they should have a lower threshold or a cap on the amount charged. Just my two paise! 😊
I work with multiple Indian startups and MSMEs and this is a genuine concern. UPI has been a game-changer for small businesses across India. If MDR becomes a reality, it might discourage them from going digital. The government should definitely reconsider this, at least for smaller enterprises.
Nobody talks about the costs borne by payment companies too. UPI infrastructure does have maintenance costs. Maybe a small MDR on high-value transactions is acceptable if the money is used to improve the system further. But it should be minimal for MSMEs. Let's not burden the
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.