New Delhi, Sept. 25 -- Banks will monitor merchants to ensure that the Merchant Discount Rate (MDR) on specified UPI transactions is not passed on to consumers, while the Indian Banks' Association (IBA) will develop a mechanism to prevent merchants from levying additional charges on digital payments, according to government sources.

The move follows the government's decision to introduce MDR on specified person-to-merchant UPI transactions above Rs 2,000, with the charge to be borne by merchants rather than consumers.

The Finance Ministry is expected to meet the IBA to discuss implementation of the MDR framework and measures to prevent merchants from passing the payment-processing charge to customers. The ministry will also consult merc...