Lok Sabha passes bill that enables MDR on UPI payments

The Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026, which amends Section 10A of the Payment and Settlement Systems Act, 2007. The amendment clears the legal path for the central government to allow a merchant discount rate on UPI payments. It does not itself impose one. The bill now moves to the Rajya Sabha, which is the only remaining step Inc42 names. Passing one house is not law, and clearing a path to levy MDR is not levying it.

Finance minister Nirmala Sitharaman told the House that “MDR applies only on the merchants and not on the end users/customers” and that it “will support the banks and fintech to invest more on infrastructure, innovation & security”. She also said the UPI and Services Steering Committee, headed by NPCI, “is yet to decide on the MDR”, and that this will happen after Parliament passes the bill. That is a second gate after the legislative one. The rate is a committee decision, not a clause in the statute.

The figures in circulation, 0.25% to 0.4% on business transactions above Rs 2,000, are described by Inc42 as what the government is expected to levy as per reports. Treat them as expectation, not policy. Person to person transfers stay exempt. RBI governor Sanjay Malhotra separately observed that consumers ultimately pay for transactions in some form. The Confederation of All India Traders has backed a nominal MDR on higher value UPI payments. UPI handled 23.66 Bn transactions worth Rs 29.88 Lakh Cr in July, up 4% and 3% over June.

For a D2C operator the modelling starts now, not at notification. Split last quarter’s UPI orders at the Rs 2,000 line and apply 0.4% to that slice alone. If that threshold holds, it puts a fee cliff exactly where most brands push average order value. A bundle that lifts a cart from Rs 1,900 to Rs 2,100 would start carrying a charge the smaller cart avoids.

Second, your prepaid incentive becomes a two sided number. Brands discount to pull buyers off cash on delivery. If UPI acquiring stops being free, that discount and the MDR stack on the same order. Reopen the gateway contract while rates are still undecided, because volume is the only leverage a seller has before a floor is set.