The centre is working towards making the Unified Payments Interface (UPI) related financial costs easy as the Finance Ministry told the Parliamentary Standing Committee on Finance that it is weighing two options.

It said the Department of Financial Services is weighing two options to ease the financial costs involving UPI. On is restoring the merchant discount rate (MDR) for certain high-value transactions or merchants, or introducing a tiered incentive structure to phase out government support over the next few years.

“Given the sustainability of the UPI ecosystem and the burden on the Government exchequer, the Department is currently exploring two options: (i) Examining the feasibility of restoring MDR for certain high-threshold transactions/merchants; and (ii) A tiered incentive structure to phase out the government support in the next few years,” the department said in a reply to the panel.

The committee, chaired by Lok Sabha member Bhartruhari Mahtab, in its report said, “While statutory enablement now exists to permit calibrated MDR on high-value transactions, any delay in notifying and operationalising this framework leaves payment service providers heavily dependent on inadequate subsidies, thereby threatening critical investments in cybersecurity, fraud prevention, and network infrastructure.”

An MDR of up to 0.30 per cent of transaction value applied to UPI merchant transactions in India until 2019. The Centre introduced zero MDR on all UPI transactions in January 2020 to accelerate digital-payment adoption and spur a shift from cash to digital.

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