New Delhi, Sept. 24 -- Banks will monitor merchants to ensure that the Merchant Discount Rate (MDR) on UPI transactions is not passed on to consumers, while the Indian Banks' Association (IBA) will develop a mechanism to prevent merchants from charging customers extra for digital payments, according to government sources.

The move comes as the government seeks to ensure that the MDR on specified UPI merchant transactions above Rs 2,000 is borne by merchants and does not result in additional charges for consumers.

Government sources said the Finance Ministry will hold a meeting with the IBA to discuss the implementation of the MDR framework and measures to ensure that merchants do not pass on the payment-processing charges to customers....