IIT Bombay Team Recommends Reducing MDR on UPI Transactions

A team of professors from IIT Bombay has recommended reducing the Merchant Discount Rate (MDR) on UPI transactions to 0.08%, compared with the 0.40% rate proposed by the National Payments Corporation of India (NPCI). The report argues that banks receive a substantial share of MDR revenue under the existing structure, with nearly 70% reportedly going to issuing and acquiring banks. It suggests reviewing the banks’ share, citing the profits they earn from current and savings accounts.

The report also recommends allocating 3% of banks’ profits towards strengthening the UPI ecosystem. For person-to-merchant transactions exceeding ₹75,000, it proposes capping the maximum MDR charge at ₹40 instead of ₹300. The suggested changes would apply only to merchants with an annual turnover of ₹50 crore or more. The report calls for a review of how MDR revenue is distributed among banks, payment service providers and third-party payment apps.