The ongoing debate over the Merchant Discount Rate (MDR) Bill and its potential impact on UPI payments has sparked a heated discussion among industry leaders. In a recent development, both PhonePe CEO Sameer Nigam and Razorpay CEO Harshil Mathur have come out in support of keeping UPI transactions free for consumers, adding fuel to the fire. This move has raised questions about the future of free UPI payments and the potential charges that consumers might face.
In a social media post, Mathur emphasized the importance of a sustainable ecosystem that protects small merchants and supports digital infrastructure. He stated, 'The principle is simple: Free for consumers. Protected for small merchants. Sustainable for the ecosystem.' This sentiment reflects a broader concern among industry players about the long-term viability of the digital payments sector.
Nigam, on the other hand, has been vocal about his stance on consumer-facing UPI payments. In a tweet, he assured users that they will not be charged for making UPI payments, stating, 'Consumers will NOT BE CHARGED anything for making UPI payments.' This clarification comes in the wake of the Lok Sabha's passage of the Taxation and Other Laws (Amendment) Bill, 2026, which allows the government to bring back MDR charges on UPI transactions.
The Payments Council of India (PCI) has also weighed in on the matter, clarifying that UPI payments will continue to remain free for consumers. The PCI stated that merchant service charges are commercial arrangements between merchants and payment service providers and do not mean that consumers pay to use digital payments. Any charges that may apply would be imposed on merchants under commercial arrangements with payment service providers.
The MDR Bill, introduced by Union Finance Minister Nirmala Sitharaman, seeks to amend three laws, including the Payment and Settlement Systems Act, 2007, the Income-tax Act, 2025, and the Finance Act, 2026. It paves the way for the government to levy an MDR on select electronic payment modes, with a potential MDR of 0.25% to 0.4% on business-directed UPI transactions above ₹2,000. However, person-to-person payments are expected to remain unaffected.
The debate over free UPI payments has raised important questions about the future of digital payments in India. While industry leaders advocate for a sustainable ecosystem that supports small merchants and consumers, the government's move to introduce MDR charges has created a sense of uncertainty. As the discussion continues, it remains to be seen how the digital payments landscape will evolve and whether consumers will ultimately bear the burden of any potential charges.
