New Delhi, Aug 13: The Centre is examining a new framework to strengthen the long-term sustainability of the Unified Payments Interface (UPI), including the possibility of introducing the Merchant Discount Rate (MDR) on select transactions and adopting a tiered incentive mechanism.
The proposed measures are aimed at addressing the growing cost of operating and expanding the UPI ecosystem while ensuring that the digital payments platform remains accessible and widely used.
Under the approach being considered, MDR could potentially be applied only to selected categories of higher-value transactions or merchants, rather than being introduced across the entire UPI network.
The government is also examining a tiered incentive structure that could gradually reduce dependence on government support as the UPI ecosystem matures. The objective is to create a more sustainable financial model for banks, payment service providers and other stakeholders.
The move comes amid the rapid growth in UPI transactions and increasing operational costs associated with maintaining the country’s digital payments infrastructure.
Any proposed changes are expected to take into account their potential impact on consumers, merchants, banks and fintech companies. The government is likely to evaluate the various options before taking a final decision.
UPI has emerged as a key pillar of India’s digital payments ecosystem, and the proposed measures are intended to support its continued expansion while ensuring its financial sustainability over the long term.