India to levy MDR on high-value UPI transactions for ecosystem sustainability

Indian authorities have announced plans to introduce a merchant discount rate (MDR) on UPI transactions valued above 2,000 rupees, marking a shift in how the digital payments ecosystem will be funded going forward. Under the new framework, 5 per cent of the total MDR collected from these higher-value transactions will be channelled into a dedicated fund. This fund will be tasked with supporting the development and maintenance of the UPI infrastructure, reducing the reliance on direct government subsidies. The move reflects efforts to create a more sustainable financial model for India's rapidly expanding digital payments network, which has become central to the country's financial inclusion agenda. By generating revenue through transaction fees rather than relying solely on government support, authorities aim to ensure the long-term viability and independence of the UPI ecosystem. The implementation of MDR on high-value transactions represents a balance between maintaining the growth momentum of digital payments while establishing a self-sustaining funding mechanism for the platform's continued development and operational requirements.