India's UPI Payments Face New Costs as Zero-MDR Regime Ends

The Indian government's decision to impose a merchant discount rate (MDR) on Unified Payments Interface (UPI) transactions has sparked intense debate in the country. The Taxation and Other Laws (Amendment) Bill, 2026, passed in Parliament recently, removes the zero-MDR regime for UPI transactions, leaving many questions unanswered.

Ranadurjay Talukdar, Payments Sector Leader at EY, explained that MDR is a fee charged by banks to merchants for processing payments. He noted that the enabling provision to remove the zero-MDR regime aims to make UPI transactions more sustainable and equitable for all stakeholders involved.

Girish Krishnan, Director of Payments at Amazon Pay India, cautioned that imposing MDR on UPI transactions could lead to higher costs for consumers and potentially slow down the adoption of digital payments. He suggested that a compromise might be needed to balance the interests of all parties.