Home / Business and Economy / UPI MDR: India's Merchant Data Dilemma
UPI MDR: India's Merchant Data Dilemma
21 Aug
Summary
- Accurate merchant verification is crucial for fair UPI MDR implementation.
- New Indian tax bill allows potential modification of zero-MDR for UPI.
- Merchant data quality will determine fairness of differentiated UPI frameworks.
India's digital payments landscape is facing renewed discussions on UPI's Merchant Discount Rate (MDR), following the passage of the Taxation and Other Laws (Amendment) Bill, 2026. This amendment provides a legal basis for potentially altering the current zero-MDR policy for specific digital transactions, though the government has assured that consumers and person-to-person payments will remain free.
The industry's attention is now pivoting from the debate over whether MDR should be reintroduced to the practicalities of implementing any selective framework. Experts emphasize that accurate merchant verification, consistent classification, and continuous risk assessment are paramount. Without high-quality merchant data, applying differentiated policies fairly could lead to inconsistencies and disputes.
To navigate this complexity, the ecosystem must address key questions regarding merchant identity verification, correct classification, tracking profile changes, and establishing clear redressal processes for errors. CARD91, a payments infrastructure provider, launched AI-led capabilities in July 2025 to enhance business verification and classification, highlighting the growing importance of merchant intelligence for operational efficiency, fraud control, and regulatory compliance, especially given UPI's immense transaction volume.
The ultimate goal, as stated by CARD91's Chief Product Officer, is not to introduce friction but to ensure legitimate businesses receive consistent treatment while financial institutions possess the necessary information for responsible risk management and policy implementation. The success of any future MDR model hinges on preserving UPI's accessibility through transparent and fair implementation, beyond just the pricing decision.
