Indian authorities keen to charge merchants fees to bolster homegrown payments network, sources say
Summary
Companies
Small fee is key for investment, UPI growth prospects
Fee proposed at 0.2% to 0.3% of transaction value - sources
Walmart's PhonePe and Alphabet's Google Pay have previously urged government to allow the fee
Average UPI transactions per month have surged to over 17 billion this year from 1.5 billion in 2020
MUMBAI/NEW DELHI, April 29 (Reuters) - India's payments authority, the central bank, and industry are pushing the government to allow a fee on digital payments to large merchants made via its homegrown network to help boost growth, five sources told Reuters.
The charge, known as Merchant Discount Rate (MDR), is considered crucial to boosting investment for payments firms, and reviving slowing growth in payments made via the Unified Payments Interface (UPI), India's own network, the sources said.
A rate of between 0.2% to 0.3% of the value of each transaction has been suggested, the sources said, which would still be lower than the charges attached to credit and debit card payments.
The MDR is usually borne by the merchants, an industry executive said, so will not be passed on to customers.
Two of the sources said a final decision on the fee would be made by Prime Minister Narendra Modi's office, but the federal finance ministry supports its implementation.
All the sources requested anonymity because the discussions are private.
The Prime Minister's office, the Reserve Bank of India, the finance ministry and the National Payments Corporation of India (NPCI) did not immediately respond to emails seeking comment.
CASHLESS
Modi has sought to reduce the use of cash locally to encourage transparency and formalisation of the economy, including through a controversial 2016 decision to demonetise large value notes.
That and the COVID-19 pandemic both helped increase the popularity of digital payments in India.
Over the last five years, the average monthly volume of UPI transactions has jumped from about 1.6 billion to over 17 billion currently, according to NPCI data.
Last month, Indians made payments worth 24.7 trillion rupees ($289.65 billion) through the UPI network in March, more than a quarter of which went to merchants.
But the growth rate of UPI payments has slowed, with the value of monthly transactions growing by an average of about 25% in 2025, down from 35% last year.
Walmart-backed PhonePe (WMT.N), opens new tab and Alphabet's GooglePay (GOOGL.O), opens new tab currently dominate UPI payments in India, and have previously called for the MDR to be levied on merchant payments. Both firms did not respond to emails seeking comment for the story.
The Payments Council of India (PCI), a lobbying body, has requested the prime minister's office to advocate for a 0.3% MDR on payments to large merchants through UPI, according to a letter reviewed by Reuters.
Without the MDR, "it will be very difficult to get the next set of Indians on the digital payments bandwagon," said Vishwas Patel, chairman of the PCI.
($1 = 85.1950 Indian rupees)
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