With reference to the Merchant Discount Rate (MDR) on UPI transactions, consider the following statements: 1. A 0.4% MDR applies to all UPI transactions regardless of the amount. 2. The government is collaborating with banks and payment aggregators for daily compliance monitoring. 3. UPI payments between individuals are subject to a 0.4% fee. Which of the statements given above is/are correct?

UPI Fees Won't Pass To Customers, No Extra GST Burden For Merchants: Sources

GS3Economy · S&T · Environment · Security· Monetary policy, RBI & banking· Prelims + Mains· 18 September 2026

Digital Public Infrastructure and payment ecosystem dynamics: a relevant GS3 and Economy topic.

Why in news

The Modi government is implementing a 0.4% Merchant Discount Rate (MDR) on UPI transactions above Rs 2,000 while ensuring costs are not passed to customers.

Background

Starting October 15, a 0.4% MDR applies to specified person-to-merchant UPI transactions exceeding Rs 2,000. The government is collaborating with payment aggregators and banks for daily compliance monitoring to protect consumers from extra costs.

Facts for Prelims

FactMDR of 0.4% applies to UPI transactions above Rs 2,000
FactUPI payments between individuals remain free
BodyPayment aggregators and banks are tasked with daily compliance monitoring

Prelims practice question

With reference to the Merchant Discount Rate (MDR) on UPI transactions, consider the following statements:

A 0.4% MDR applies to all UPI transactions regardless of the amount.
The government is collaborating with banks and payment aggregators for daily compliance monitoring.
UPI payments between individuals are subject to a 0.4% fee.

Which of the statements given above is/are correct?

(a)2 only
(b)3 only
(c)1 and 2 only
(d)1, 2 and 3

Show answer

Answer: (a) 2 only — Statement 2 is correct. Statement 1 is incorrect: The MDR applies only to transactions exceeding Rs 2,000. Statement 3 is incorrect: UPI payments between individuals remain free.

For Mains

Q. Discuss the implications of introducing Merchant Discount Rates (MDR) on UPI transactions for the growth of India's digital payment ecosystem.

Dimensions to cover in your answer

Cost-push inflation: Risk of merchants passing transaction costs to consumers despite government monitoring
Sustainability of free-tier: Balancing the fiscal viability of UPI infrastructure with the goal of universal digital adoption

Keywords: Digital Public Infrastructure · Merchant Discount Rate · Financial Inclusion · Compliance Monitoring · Payment Aggregators

Read the full news →Source: NDTV ↗Also: GS2 · e-Governance & citizen services Also: GS3 · IT, AI, semiconductors & computing

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This note is generated automatically from SatyaDheesh's news feed and mapped to the UPSC CSE syllabus. Check facts against the original report or PIB before using them in an answer.