IIT Bombay Calls for UPI Merchant Discount Rate Rationalisation

The Indian Institute of Technology Bombay has recommended a targeted approach to the Unified Payments Interface merchant discount rate framework, suggesting that MDR charges should be applied selectively rather than universally across all merchant categories.

According to the report, implementing MDR primarily on businesses with annual turnover of Rs 50 crore and above would help balance the financial sustainability of digital payment infrastructure with broader public interest concerns. The institute's analysis highlights that a more rationalised framework could prevent potential erosion of confidence in India's widely-adopted UPI ecosystem.

The recommendation comes as policymakers continue to debate the role of MDR in ensuring that payment service providers can maintain their platforms while keeping digital payments accessible and affordable for India's large base of small merchants and users.

IIT Bombay's proposal suggests that exempting smaller merchants from MDR charges could encourage wider adoption of digital payments among small businesses and traders, while allowing service providers to recover infrastructure costs from larger commercial entities. The report emphasises that such a differentiated approach would protect public trust in the payment system during a critical phase of India's digital financial expansion.

The findings add to ongoing discussions between regulators, payment networks, and industry stakeholders on structuring UPI's commercial framework to support both innovation and financial inclusion.