What happened
The Government of India told Parliament through the Parliamentary Standing Committee on Finance that the current Unified Payments Interface (UPI) payment setup is not financially sustainable. The Government of India stated that financial unsustainability could undermine investments needed for cybersecurity, fraud prevention, and network infrastructure.
Policy options being explored for UPI self-sustainability
The Government of India submitted two approaches to make the UPI platform more self-sustaining.
Approach one: the Government of India explored charging Merchant Discount Rate (MDR)—a processing/acceptance fee—in selected categories of high-value transactions and for high-turnover merchants. The Government of India submissions did not provide specific MDR rates or cut-offs in the provided information.
Approach two: the Government of India explored a tiered incentive structure—incentives with multiple levels—to gradually phase out partial reimbursement for low-value UPI transactions at small merchants. The Government of India submissions did not provide the exact tier design or phase-out timeline in the provided information.
Related current affairs
- Government assures no charges for UPI users; MDR, if any, will be nominal and threshold-based
- UPI and the cost of policy reversal
- As Govt. mulls MDR on UPI, data shows cash usage quickening
- Rajya Sabha clears two Bills; Minister says consumers will not pay UPI charges
- India Post Payments Bank marks 9th Foundation Day; launches DakPay Sound Box for merchants and new digital platforms (Digital Insurance Technology Platform, Digital Mutual Fund Platform)
- UPI turns a decade-old, sees 13,000-fold surge in transaction volume