NEW DELHI – Leading figures in India's fintech industry, including MobiKwik co-founder Upasana Taku and PhonePe Founder & CEO Sameer Nigam, have voiced strong support for the recently introduced Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions over ₹2,000. The move, which imposes a 0.4% charge on merchant transactions above this threshold, aims to bolster the long-term sustainability and growth of India's rapidly expanding digital payments infrastructure.
Why MDR is Needed for UPI's Future
Upasana Taku described the introduction of MDR as a highly positive step for India, emphasizing the escalating costs associated with maintaining the vast UPI infrastructure. She explained that while UPI has revolutionized digital payments in India, payment companies and banks have struggled to absorb these operational expenses.
“This new direction is very positive for the payments industry, banks, and payment companies. For the common Indian customer, there is effectively no change. Person-to-person transactions, such as payments to family and friends, remain free. Small-value everyday transactions – buying bread, vegetables, and other items worth ₹200, ₹500 or ₹1,000 – also remain free,” Taku elaborated.
She clarified that the MDR charge would primarily apply to larger transactions, such as booking flight tickets, online shopping for expensive items, or purchases at malls.
Ensuring Industry Sustainability
Sameer Nigam of PhonePe echoed Taku's sentiments, highlighting that the revenue generated from the MDR would help the industry recover its operational costs. Nigam noted that the payments industry had been incurring substantial losses annually when UPI transactions were entirely MDR-free.
“We have consistently raised this issue with the government and the RBI,” Nigam stated. He pointed out that while digital payment systems are prevalent globally, India was unique in having MDR-free UPI transactions. “Now that a limited MDR has been introduced, we hope it will contribute to the further growth of the UPI ecosystem. This additional revenue will enable the industry to invest more in expanding UPI.”
UPI's Remarkable Growth and Global Footprint
UPI, operated by the National Payments Corporation of India (NPCI) – an initiative of the Reserve Bank of India and the Indian Banks' Association – has witnessed phenomenal growth. Transaction values surged from ₹0.07 lakh crore in FY2017 to approximately ₹314 lakh crore in FY2026, marking a more than 4,000-fold increase over a decade.
The platform's reach has also expanded internationally, now accepted in 11 countries, with Uzbekistan being the latest addition. Other nations where UPI facilitates payments include Singapore, the United Arab Emirates, France, Mauritius, Nepal, Bhutan, Qatar, Sri Lanka, Cambodia, and Greece.
This strategic financial adjustment is seen by industry leaders as a critical measure to ensure the continued innovation and expansion of India's robust digital payment infrastructure.