India has taken a step toward reintroducing merchant fees on transactions made through its Unified Payments Interface (UPI) after proposed amendments to the country’s payment laws were introduced in Parliament on Tuesday.
UPI, one of the world’s largest real-time payment networks, processed 23.6 billion transactions worth 29.9 trillion rupees (US$313.5 billion) in July, according to official data. PhonePe and Google Pay remain the dominant platforms on the network.
Industry executives have long argued that the absence of merchant discount rates (MDR) on UPI transactions has made it increasingly difficult for payment companies to sustain growth and invest in expanding the digital payments ecosystem.
The proposed amendment to India’s Payment and Settlement Systems Act, introduced by Finance Minister Nirmala Sitharaman, would provide the legal framework to allow the imposition of an MDR on digital payments, according to industry and regulatory sources.
The sources said the amendment does not immediately introduce the fee, but creates the legal basis for doing so. No decision has yet been made on the level of charges or the types of transactions that may be affected.
India’s Finance Ministry, Reserve Bank of India, and the National Payments Corporation of India (NPCI) did not immediately comment on the proposed changes.