India Explores Restoring UPI Fees for High-Value Merchants

The Department of Financial Services is evaluating two strategies to make the Unified Payment Interface (UPI) financially self-sustaining and reduce the burden on the government exchequer. The proposed options include restoring Merchant Discount Rates (MDR) for high-value transactions and high-turnover merchants, or implementing a tiered incentive structure to phase out government subsidies over several years. This follows a 2020 policy that eliminated MDR for all UPI P2M transactions to accelerate digital adoption.

The Parliamentary Standing Committee on Finance warned that current government subsidies are inadequate, noting a stark mismatch between the ₹2,000 crore budget allocation for FY 2026-27 and the industry's estimated operational cost of ₹20,700 crore. The committee cautioned that this funding gap, which covers only about 11% of costs, could constrain critical investments in cybersecurity, fraud prevention, and network infrastructure.

Legislative authority to reimpose these charges was established via the Taxation and Other Laws (Amendment) Bill, 2026, passed on August 6, 2026. While the legal framework exists, the government has not yet finalized specific transaction thresholds or MDR rates. Finance Minister Nirmala Sitharaman has clarified that no charges will be levied on consumers or small businesses.