Reports suggesting that the Merchant Discount Rate (MDR) will be applied to large-size Unified Payment Interface (UPI) transactions are false and misleading. Various claims circulated on Wednesday that the government is planning to impose MDR on large-size UPI transactions. However, the Ministry of Finance has clarified that these claims are 'completely false, baseless, and misleading'. On the social media platform X (erstwhile Twitter), the Ministry posted, “Speculation and claims that the MDR will be charged on UPI transactions are completely false, baseless, and misleading. Such baseless and sensation-creating speculations cause needless uncertainty, fear, and suspicion among our citizens.”
What Is MDR?
For all digital transactions, including debit and credit cards, net banking, and UPI, banks used to charge a fee from merchants for real-time payment processing. The charge may range from 1 to 3 per cent of the transaction value. According to the HDFC Bank website, “MDR refers to the rate at which merchants are charged for accepting Debit Card and Credit Card payments and funds paid via net banking and Digital Wallets. Merchants are usually required to agree to this rate as decided by the payment service provider and set up the facility before they can start accepting digital payments. Generally, MDR charges are around 2-3 per cent of the transaction amount. For instance, if a customer has made a purchase to the tune of Rs 10,000 and paid via credit card, then as per 2 per cent MDR charges, the merchant will have to pay Rs 200 to accept the payment.”
However, the government waived the charges a few years ago. Since January 1, 2020, the government has waived the charges on RuPay cards and UPI transactions to promote their use. This is one of the reasons merchants now prefer receiving payment through UPI over card-based payments.
It resulted in higher adoption of UPI, which the data also confirms. According to the National Payments Corporation of India’s (NPCI) May 2025 data.
UPI Growth Over The Year:
UPI transactions surpassed 18.68 billion transactions in May 2025 compared to 17.89 billion in April and 18.30 billion in March 2025. It is not just the total volume but the daily average volume has also been increasing month-over-month from 590.37 million in March to 596.45 million and 602.50 million in April and May 2025, respectively.
UPI’s transaction volume has grown around 33 per cent compared to the 14.03 billion transaction in May 2024. Its average transaction value also grew by 23 per cent from Rs 65965.71 crore in May 2024 to Rs 81106.36 crore in May 2025.
UPI was launched in 2016 and since then it has made tremendous growth, particularly in the retail segment. The government also wants to promote UPI and other digital transactions. “The Government remains fully committed to promoting digital payments via UPI”, reads Ministry’s X post.
