The ongoing debate over imposing Merchant Discount Rate (MDR) charges on Unified Payments Interface (UPI) transactions has raised concerns among consumers and small retailers across India. However, the Payment Council of India (PCI) has clarified that there is currently no proposal to charge customers for using UPI.
The clarification comes amid discussions surrounding the Payments and Settlement Systems (Amendment) Bill, 2026, which had led to speculation that both consumers and merchants could eventually have to pay charges for UPI transactions.
According to PCI, UPI has remained free for consumers since its launch in 2016, allowing users to make instant digital payments without transaction charges. The organisation also clarified that small merchants, including local shopkeepers, street vendors, ice-cream sellers and sweet shops, will not have to pay MDR for accepting UPI payments under the existing arrangement.
What Is MDR?
Merchant Discount Rate is a fee generally associated with digital transactions and is paid by merchants to banks or payment service providers for processing payments. While customers do not directly pay MDR, concerns have been raised that imposing such charges could discourage small businesses from accepting digital payments or could indirectly increase costs for consumers.
Supporters of MDR argue that such charges could help fund payment infrastructure, cybersecurity and the development of digital payment systems.
MDR Does Not Mean Customer Charges
PCI has stressed that a Merchant Service Charge, wherever applicable, is a commercial arrangement between merchants and payment service providers. It does not automatically mean that customers will be charged for making UPI payments.
The organisation said keeping digital payments affordable for small merchants has played an important role in the rapid growth of UPI transactions in India.
For now, consumers can continue using UPI without transaction charges, while small retailers can continue accepting UPI payments without MDR under the prevailing framework. Any future changes would depend on government policy and regulatory decisions.
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