India, Sept. 11 -- The government may soon notify a framework for levying a merchant discount rate (MDR) on select Unified Payments Interface (UPI) transactions, with the fee potentially set at around 40 basis points (bps), or 0.4% of the transaction value.

According to an Economic Times report, issuing banks could receive 40% of the MDR, while the remaining fee could be divided equally between third-party application providers (TPAPs), such as PhonePe and Paytm, and acquiring banks, with each receiving 30%.

At an MDR of 40 bps, this would translate into around 16 bps for the issuing bank and 12 bps each for the TPAP and acquiring bank.

The framework is yet to be formally notified, and the final MDR, transaction threshold, and merchant...