Startup Policy Forum endorses discount rates on UPI for large merchants
The endorsement follows the Payments Council of India’s (PCI) recent warnings that the absence of MDR on UPI and RuPay transactions, combined with reduced government incentives, is straining the business models of fintechs and payment processors.
The Startup Policy Forum (SPF), a coalition of India’s leading startups, has thrown its weight behind the push to introduce a merchant discount rate (MDR) on Unified Payments Interface (UPI) transactions for large merchants.
SPF, which counts Razorpay, CRED, Groww, Zerodha, and Pine Labs among its members, described the move as a “gamechanger” that would drive innovation, curb fraud, and sustain payment companies.
The proposal aims to establish a two-tiered MDR framework, keeping small merchants exempt while allowing controlled fees for large enterprises.
"SPF recognizes that in a nation as diversified as India, growth imperatives have to be balanced with inclusion. The two-tiered model of MDR ensures this balance by exempting small merchants from the proposed MDR framework and preserving the extant zero MDR framework for them," the organisation said.
This distinction will also ensure the long-tail of small value merchants have adequate impetus to ramp up and experience digital payments acceptance, ensuring UPI witnesses the next wave of growth. it added.
“The proposed MDR model balances growth with inclusion,” SPF said in a statement, adding that it ensures smaller merchants continue to benefit from the zero-MDR regime while enabling the industry to invest in digital infrastructure.
The endorsement follows the Payments Council of India’s (PCI) recent warnings that the absence of MDR on UPI and RuPay transactions, combined with reduced government incentives, is straining the business models of fintechs and payment processors.
PCI had urged policymakers to reconsider MDR on high-turnover merchants, arguing that the Rs 1,500 crore allocated for digital payments incentives in FY25 was inadequate for sustaining the industry.
The debate underscores growing concerns over the long-term viability of India’s digital payments ecosystem, which processes transactions worth trillions but operates on razor-thin margins.
Edited by Jyoti Narayan