The Unified Payments Interface (UPI) has changed how people in India pay for things, offering quick and free money transfers. But this might not last. The Payments Council of India (PCI) wants to bring back the Merchant Discount Rate (MDR), a fee for digital payments, on UPI and RuPay transactions. This news comes on April 6, 2025, and could shake up how we use digital money in India. With less government support, banks and payment companies say they need this fee to keep things running.
No Free UPI Transactions: Why the Change?
UPI lets you send money between banks instantly using apps like Google Pay or PhonePe, and it’s been free since January 2020. Back then, Finance Minister Nirmala Sitharaman stopped MDR fees—small charges merchants paid for digital transactions—to push digital payments. Before that, merchants paid less than 1% per payment.
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The government gave money (Rs 3,500 crore in FY24) to cover costs, but this year, it’s only Rs 1,500 crore. Experts say it takes Rs 10,000 crore yearly to run UPI, so banks and fintech firms want MDR back. They argue it’s hard to keep improving security and services without extra funds. They also say UPI should charge like credit cards (1%-3% MDR) to make things fair.
What Happens If MDR Returns?
If MDR comes back, things could change for everyone. Merchants might pay a small fee, like 0.3%, on UPI payments, raising their costs. They could pass this on by charging customers more or asking for cash instead, slowing India’s digital push. For you, prices might go up a bit, or some shops might not take UPI. But for payment companies, this fee means more money to improve apps, fight fraud, and help users. UPI handled 16 billion transactions worth Rs 22 lakh crore in February 2025 alone, showing its huge role. The PCI says this change keeps it going strong, but it’s up to the government to decide. So, will their be no free UPI transactions? We’ll soon find out!
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