"New law may allow banks to charge merchants for UPI transactions"
Merchant Discount Rate (MDR)
fee charged by a merchant's bank for processing a digital payment, shared among acquiring bank, issuing bank, and payment network.
Section 10A, PSS Act
provision inserted by Finance Act 2020 prohibiting charges on UPI/RuPay transactions; now amended by Parliament.
India's Unified Payments Interface (UPI), launched by the National Payments Corporation of India (NPCI) in 2016, is today the world's largest real-time payments infrastructure by transaction volume. NPCI is a not-for-profit entity established under the Payment and Settlement Systems (PSS) Act, 2007, which grants the Reserve Bank of India (RBI) overarching authority to license, regulate, and supervise all payment system operators in the country. UPI's open, interoperable, real-time bank-to-bank transfer architecture was catalysed by the Jan Dhan-Aadhaar-Mobile (JAM) trinity and the demonetisation shock of 2016, which together accelerated India's shift toward a less-cash economy.
A critical policy lever in UPI's mass adoption was the abolition of the Merchant Discount Rate (MDR) on UPI and RuPay transactions. The Finance Act, 2020 inserted Section 10A into the PSS Act, explicitly prohibiting any bank or payment system provider from imposing charges on electronic payment modes prescribed under Section 269SU of the Income Tax Act, 1961. Section 269SU mandates that businesses with an annual turnover exceeding ₹50 crore must mandatorily accept payments through specified modes including RuPay debit cards and BHIM-UPI QR codes. Together, these provisions created a zero-MDR regime for UPI, which became the cornerstone of India's digital payments growth story. The government compensated banks and payment service providers through a periodic budgetary incentive scheme to offset foregone revenue.
The Merchant Discount Rate (MDR) is the fee charged by a merchant's bank for processing a digital payment — typically a small percentage of the transaction value shared among the acquiring bank, the issuing bank, and the payment network. On credit cards, MDR typically ranges from 1–3%; for UPI it was effectively eliminated. The cost of operating the UPI platform — estimated at ₹0.4–1 per transaction — has since been borne by the banking system and NPCI, with partial government reimbursement. As transaction volumes scaled to billions monthly, this arrangement created a structural sustainability question for payment infrastructure funding.
UPI operates as an overlay on India's existing banking infrastructure, enabling both Person-to-Person (P2P) and Person-to-Merchant (P2M) instant transfers via mobile. …
Which of the following is a most likely consequence of implementing the 'Unified Payments Interface (UPI)'?
Which one of the following statements about Unified Payments Interface (UPI) and Central Bank Digital Currency (Digital Rupee) is not correct?
With reference to digital payments, consider the following statements :
1.BHIM app allows the user to transfer money to anyone with a UPI-enabled bank account.
2.While a chip-pin debit card has four factors of authentication, BHIM app has only two factors of authentication.
Which of the statements given above is/are correct?
Consider the following countries:
I.United Arab Emirates
II.France
III.Germany
IV.Singapore
V.Bangladesh
How many of the above are countries, other than India, where UPI is used for international merchant payments?
With reference to the Merchant Discount Rate (MDR) on UPI transactions, consider the following statements:
1.MDR is the fee charged by the acquiring bank to the merchant for processing a digital payment.
2.The government has mandated zero-MDR on UPI and RuPay debit card transactions to promote digital payments.
3.Under the zero-MDR regime, banks and payment service providers receive no compensation whatsoever for processing UPI transactions.
Which of the statements given above is/are correct?
Consider the following statements about the institutional framework governing UPI:
1.NPCI is a statutory body established under the Payment and Settlement Systems Act, 2007.
2.The RBI is the apex regulator of all payment system operators in India under the PSS Act, 2007.
3.NPCI International Payments Limited (NIPL) is a wholly owned subsidiary of NPCI set up to enable UPI adoption abroad.
Which of the statements given above is/are correct?
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