Someone has to pay cost, but MDR on UPI proposal still premature: RBI Governor
Mumbai, Aug 5
RBI Governor Sanjay Malhotra said on Wednesday that costs have to be paid by someone for the sustainability of the public infrastructure for digital payments to run the UPI system, but this may not fall on general consumers.
He was responding to a question, at a press conference here, on how the RBI plans to impose a merchant discount rate (MDR) or commission on UPI transactions.
"It is very premature to say something on it, let's wait and watch for the development, ultimately it is the consumers who pay but it may not be the general consumers," he remarked.
The RBI Governor had also said last month that digital infrastructure costs have to be covered, but there is no formal framework or proposal to charge everyday users.
The Finance Ministry has proposed legislative changes to the Payment and Settlement Systems Act which is aimed to allow potential flexibility for future merchant charges on high-value UPI transactions above ₹2,000. However, regular consumer UPI payments would remain free, according to senior officials.
Government officials said that over 90 per cent of the transactions that include daily purchases of milk, vegetables and groceries will not attract an MDR charge.
At present credit and debit card purchases come under MDR but most merchants to do not pass on the cost to consumers.
The finance ministry proposed amending section 10A of the Payment and Settlement Systems Act, removing rigid zero-charge mandates to allow future government notification on transaction fees.
The Bill introduced in the Lok Sabha changes the legal framework, giving the government the flexibility to decide in the future which digital payment modes should remain exempt from charges and which could attract MDR.
Currently, the law prevents banks and payment service providers from levying charges on notified payment modes such as UPI and RuPay debit cards.
The amendment would remove this blanket statutory protection and pave the way for the government to notify which electronic payment modes will remain exempt from charges and which could attract MDR.
— IANS
Reader Comments
"Ultimately it is the consumers who pay" - this is the most honest statement I've heard from a regulator in years. As long as the small vendors and daily users aren't charged, I'm okay with some flexibility. But please ensure transparency in how the MDR would be structured. The devil is in the details!
I think this is a sensible approach. UPI has become the backbone of digital India, but we can't expect it to run on charity forever. The key is to ensure that the 90% small transactions remain free. The government should keep a close watch on how banks implement this - we don't want them to sneak in charges through the backdoor.
As someone who uses UPI for everything from kirana store to paying my daughter's school fees, I'm a bit worried. Even though they say small transactions will be free, what about the middle class who frequently make payments above ₹2000? We're not rich, but we might end up paying. Please reconsider the ₹2000 threshold!
Living in India for work, I've seen how UPI revolutionised payments here. The government's cautious approach is right - they shouldn't rush into MDR implementation. The ecosystem has grown because it's free. A sudden charge could disrupt adoption, especially in smaller towns where people are just getting comfortable with digital payments.
There's a trust factor at stake here. People have made UPI their primary payment method because it's free and reliable. If charges are introduced, many will go back to cash. The government should focus on making the system more efficient rather than finding ways
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.