MDR on UPI transactions should be reduced to 0.08 percent

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Mumbai: Unified Payments Interface (UPI) Commercial On transactions, IIT-Bombay (IIT-B) professors Ashish Das and Pragya Das recommended reducing the fee (MDR-Merchant Discount Rate) payable by the merchants to the respective banks from 0.40% to 0.08%. As the banks are already making enough profits, MDR Rupena suggested that the banks should not be given a share of the amount collected. According to their report..

• The proposed 0.40% MDR on commercial transactions above Rs 2,000 should be reduced to 0.08 percent. 
• Of this 0.08 percent, 0.06% should be given to Third-Party App Providers (TPAP) like PhonePay, GooglePay, and 0.02% to Payment Service Providers (PSP). Banks don't have to give anything.

Why should banks get a share..

Banks have earned a net interest margin (NIM) of Rs 4.85 lakh crore in 2025-26 through CASA (current account, savings account) deposits. All this was obtained from the funds of the depositors.

• 3% (Rs. 15,000 crores) should be allocated from these funds to run and improve the UPI system. Also MDR revenue should not be relied upon for these services. 
• The Reserve Bank of India (RBI) and the government should consider the proposal to make UPI a basic service that banks must provide, like Core Banking Solutions (CBS). 

Other Key Recommendations

• Maximum MDR on UPI transaction should not exceed Rs.40. This maximum limit is Rs.300 as per the scheme to come into force. 
• UPI MDR rules should be limited to merchants with an annual turnover of Rs.50 crore or more. 
• With easy availability of digital payments, RBI should review ATM free withdrawal limits. 
• Credit card MDR should be reduced so that the burden of credit card users does not fall on common UPI users.

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