Government, banks to decide subsidy amount for UPI that will continue after MDR comes in
The Indian government is negotiating with the Indian Banks’ Association to determine the future of UPI subsidies as the Merchant Discount Rate (MDR) is set to be implemented on October 15. Officials are working to ensure merchants do not pass these costs onto consumers.
Why it matters
The transition to a fee-based model for UPI could impact the widespread adoption of digital payments in India, which has been a cornerstone of the country's financial inclusion strategy.
The Merchant Discount Rate (MDR) on UPI will not be enough to cover the cost of running and maintaining the payment platform, and so the government will soon hold discussions with the Indian Banks’ Association (IBA) to decide on what quantum of the ongoing government subsidy should continue and in what form, sources in the Ministry of Finance have confirmed.
The Ministry of Finance will also coordinate with the IBA on how to ensure that merchants do not pass on the MDR charge to customers. The MDR charge will go live on UPI on October 15, and there is no proposal to delay this date, the sources said.
The government has budgeted ₹2,000 crore for the ongoing financial year under its incentive scheme for the promotion of RuPay Debit Cards and low-value BHIM-UPI transactions.
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