Overview
- The finance ministry used the Payment and Settlement Systems Act to bar banks and system providers from charging UPI and RuPay debit transactions up to ₹2,000, and an NPCI circular fixes a 0.40% MDR for selected person‑to‑merchant payments above that threshold.
- The new MDR rules, which take effect on 15 October 2026, include a flat ₹5 fee for five low‑margin categories such as railways and fuel, a ₹300 cap on very large payments, and an exemption for QR merchants whose receipts are ≤ ₹1 lakh per month.
- NPCI will split collected MDR between banks, payment apps and service providers and will allocate 5% of total MDR receipts to a dedicated development fund for building payments infrastructure in tier‑3 towns and rural areas.
- Industry reactions are mixed: PhonePe CEO Samir Nigam called 0.4% a modest, globally low rate that helps cover operational, security and fraud‑prevention costs, while critics including Ashneer Grover described any levy as effectively a tax and opposition leader Rahul Gandhi accused the government of yielding to external pressure.
- The change targets long‑standing sustainability concerns for the world’s largest retail fast‑payment system by volume and could generate meaningful recurring revenue for banks and fintechs, with estimates used by analysts and the government to justify reduced subsidy reliance and further investment in system resilience.