UPI MDR: From 0.40% to 0.08% what IIT Bombay report has proposed and why it wants new fee structure, explained

The revised MDR fee framework for UPI transactions could burden consumers through higher retail prices, even as merchants are barred from directly passing on the charges, an IIT Bombay report has warned, calling for changes to the proposed model.

A technical report by researchers associated with IIT Bombay has warned that the revised merchant discount rate (MDR) on select UPI transactions could indirectly burden customers and proposed changes to the government's fee model, ANI reported today.

While estimating that the MDR framework could generate about ₹18,000 crore annually for payment service providers, the report argued that customers may feel the burden through higher retail prices, despite merchants being barred from directly passing on the charges.

The report titled ‘UPI at a Crossroads: Reintroducing the MDR’ warned that businesses may incorporate the additional expense into their general selling prices to protect profit margins, potentially making even customers undertaking transactions below ₹2,000 bear part of the cost, the report added.

“UPI may lose public trust if it is floated as per the presently proposed MDR framework,” the report said, adding that the framework must be “tweaked and rationalised before implementation”.

Argument against MDR on UPI: What IIT Bombay says

Under the revised framework, merchant payments above ₹2,000 can attract an MDR of up to 0.40%, capped at ₹300 per transaction. Person-to-person (P2P) transfers and merchant payments up to ₹2,000 remain free.