Top StoryPolicyPayments● High Urgency
⊙ Entrackr · Aug 4-5, 2026Confirmed
A new bill lays the groundwork to bring back MDR on UPI, even as RBI calls it premature
Fact
The Centre introduced the Taxation and Other Laws (Amendment) Bill, 2026 in the Lok Sabha on August 4, proposing changes to the Payment and Settlement Systems Act, 2007 that would give the government flexibility to decide which electronic payment modes stay exempt from merchant charges, including merchant discount rate (MDR), per Entrackr. The amendment removes the existing reference to the Income Tax Act from provisions on electronic payment modes. A day later, RBI Governor Sanjay Malhotra told reporters that talks of imposing MDR on UPI are "very premature," per Inc42, while acknowledging that "the costs have to be paid by someone" if the public UPI infrastructure is to keep strengthening.
Interpretation
UPI has been effectively free for merchants to accept since MDR was zeroed out in 2020, and that free-acceptance assumption is baked into the economics of every D2C brand and small merchant using it today. A bill that hands government the legal flexibility to reintroduce MDR, even paired with a governor calling the timing premature, is the clearest signal yet that the zero-MDR era has an expiry date being actively drafted, not just debated. The RBI governor's own framing, "the costs have to be paid by someone", telegraphs which direction this eventually goes.
Action
D2C founders currently pricing UPI as a free payment rail should model a 2026-30bps MDR scenario into unit economics now, not after a rate is announced, and start conversations with payment gateways about which of them would absorb versus pass through any future UPI MDR.
Watch Next
Whether the amendment bill passes in its current form, and whether any MDR reintroduction carries a merchant-size threshold that could exempt smaller D2C sellers.