UPI at 10: Zero-MDR Rethink and Section 10A Amendment
Why in the news
UPI reached its tenth year just as Parliament cleared a law lifting the legal ban on merchant fees for UPI and RuPay debit card payments.
Key facts
- Law: Taxation and Other Laws (Amendment) Bill, 2026, amending Section 10A of the Payment and Settlement Systems Act, 2007.
- Effect: Merchant Discount Rate (MDR) can now be levied on UPI and RuPay debit.
- UPI: pilot in April 2016 by RBI and NPCI; full rollout in August 2016.
- Built on IMPS; uses VPAs or QR codes for instant transfers.
Proposed threshold-based MDR
| Who | Treatment |
|---|---|
| Consumers and P2P transfers | Entirely free |
| Small merchants (turnover under ₹1–1.5 crore), incl. kirana shops | No merchant fee |
| Large enterprises | Nominal MDR of roughly 0.05% to 0.3–0.6%, only on P2M payments above ₹2,000 |
Growth drivers
- 2012–13: RBI vision papers named IMPS as the base for mobile payments.
- 2016 and 2020: demonetisation and the pandemic pushed users from cash to QR.
- 2019–2021: venture money into Paytm and PhonePe widened Point-of-Sale reach.
- 2020: after the Nandan Nilekani Committee, 0% MDR was mandated on UPI and RuPay.
Exam angle
- Section amended: Section 10A of the PSS Act, 2007.
- Related terms: MDR, P2P, P2M, VPA, IMPS.