New Delhi, Sept. 16 -- The government is putting a price for merchants using its flagship digital payment network to accept large transactions - a shift that follows years of warnings from the payment industry that the annual subsidy budgeted for the UPI never came close to covering the real cost of running it.
The NPCI, which operates the UPI network, said the revenue will support investment in infrastructure resilience, cybersecurity, fraud prevention, innovation and customer service. "The MDR is distributed only amongst the UPI ecosystem, to further invest into infrastructure resilience, innovation, cybersecurity (protecting the UPI infrastructure with banks and non-banks) and customer service."
The move ends a zero-MDR regime that has been in place since January 2020, when the government scrapped merchant fees on UPI and RuPay debit card transactions to accelerate digital-payments adoption, compensating banks and fintechs instead through an annual budgetary incentive scheme. Since then, UPI has grown far beyond the scale envisaged. The network processed 2,451 crore transactions valued at Rs 29.9 lakh crore in August 2026. At that scale, the cost of keeping the system reliable, secure and capable of handling ever-higher volumes has also risen.
NPCI has said industry estimates put the annual cost of operating UPI - servers, bandwidth, fraud prevention and bank technical support - at roughly Rs 20,000 crore a year. The Department of Financial Services separately told Parliament's Standing Committee on Finance that the payments industry spends about Rs 20,700 crore annually on P2M transactions alone.
Also, a parliamentary committee report flagged that the absence of an MDR was making UPI financially difficult to sustain.
Published by HT Digital Content Services with permission from Millennium Post.