IIT-Bombay Advocates for Lower UPI Transaction Fees
The Indian Institute of Technology, Bombay (IIT-B), has issued a report proposing significant changes to the charges associated with Unified Payments Interface (UPI) transactions. The study recommends a drastic reduction in the Merchant Discount Rate (MDR), which is a fee merchants pay on every transaction conducted through UPI.
The report suggests lowering the MDR from the existing 0.4% to just 0.08%. This reduction is aimed at enhancing the adoption and efficiency of digital payments across the country, making them more attractive to users and merchants alike.
Call for Banks to Relinquish Their Fee Share
A critical aspect of the IIT-B report is the call for banks to voluntarily relinquish their portion of MDR charges. The institution argues that banks have already amassed considerable benefits from current account and savings account (CASA) deposits, amounting to Rs 4.85 lakh crore in the fiscal year 2026. Given these substantial earnings, the report posits that banks can afford to play a pivotal role in further easing the financial burden on merchants by reducing or waiving MDR fees for UPI transactions.
Impact on Digital Payment Landscape
The recommendation to slash MDR fees is expected to invigorate the digital transaction ecosystem significantly. By lowering costs, more businesses, especially small and medium enterprises, might be encouraged to fully integrate UPI systems into their payment processes. This could result in a more digitally engaged economic environment, fostering growth and accessibility in the market.
Supporters of the recommendation argue that this move will not only benefit merchants but also stimulate overall economic activity by easing transaction flows and encouraging cashless payments. However, the report’s implementation would require collaboration and consensus among various stakeholders in the banking and financial service industries.
Moving Forward
As the digital payment space evolves, proposals like those from IIT-Bombay set the stage for discussions on financial strategies that promote wider adoption of cashless transactions. The willingness of banks to cooperate and the overall industry’s response to these recommendations will be crucial in determining the future landscape of UPI transactions in India.
Photo by Briana Tozour on Unsplash
