PCI Seeks MDR on UPI for Large Merchants: Sustainability Gap
Why in the news
The Payments Council of India (PCI) wrote to PM Narendra Modi warning that UPI’s economics are strained and asking for modest charges on large merchants.
Key facts
- Annual cost to run and expand UPI: about ₹10,000 crore.
- Incentive budget shrank: ₹3,500 crore in FY24, ₹1,500 crore in FY25.
- Zero MDR in force since January 2020; MDR is the fee merchants pay providers per transaction.
PCI’s proposals
| Instrument | MDR level |
|---|---|
| UPI (large merchants only) | 0.3% proposed |
| RuPay debit cards (all merchants) | MDR proposed |
| Credit cards (existing) | About 2% |
| Non-RuPay debit cards (existing) | About 0.9% |
Rationale
- Around 50 lakh of 6 crore merchants are large and already familiar with MDR on other modes.
- Small merchants (turnover below ₹20 lakh a year per RBI; 90% of digital-accepting merchants) stay exempt.
- Monetisation would fund innovation, cybersecurity, onboarding, compliance and IT, and avoid grassroots disruption.
Concern
Without revenue, maintaining and scaling UPI amid rising costs will stay difficult.
Exam angle
- MDR = Merchant Discount Rate; zero MDR since January 2020.
- Small merchant definition: turnover under ₹20 lakh a year.