UPI Monetisation

This year’s most significant payments reform is beginning to take shape.

The Taxation and Other Laws (Amendment) Bill, 2026 proposed to be introduced in Parliament, could open the door to a more sustainable and balanced framework for UPI.

The Bill would amend Section 10A of the Payment and Settlement Systems Act, 2007. Today, the zero-charge mandate is tied to payment modes prescribed under Section 269SU of the Income-tax Act.

The Bill would cut that link and allow the Central Government to notify which payment modes must remain charge-free.

This does not bring MDR (Merchant Discount Rate) back by itself. But it creates the legal space for UPI monetisation.

Startup Policy Forum has long championed a two-tier model: preserve zero MDR for small merchants, keep UPI free for consumers, and permit a calibrated MDR for large merchants.

This approach recognises that UPI’s growth and financial inclusion do not have to pull in opposite directions. A well-designed framework can advance both.

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Why this matters?

UPI’s next phase will require sustained investment. Banks, payment companies and fintechs continually invest in processing capacity, cybersecurity, fraud prevention, grievance redress and product innovation.

Government incentives can help, but they cannot replace a durable business model.

A calibrated MDR framework can protect small merchants and consumers while supporting stronger infrastructure and greater innovation.

SPF welcomes this enabling step. We look forward to engaging with the Ministry of Finance, the Reserve Bank of India and NPCI to support the next phase of UPI’s growth.