PhonePe cofounder and chief executive, Sameer Nigam, and Razorpay cofounder and chief executive, Harshil Mathur, have argued in favour of a sustainable business model that echoes the position of the Payments Council of India (PCI). The industry association has sought to separate free everyday payments from charges on select merchant transactions to ensure commercial viability of the service.
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ET was the first to report in its July 16 edition that the Indian government was in the final stages of considering merchant discount rate (MDR) for large merchants. The fee could be set at 5-7 basis points for businesses with annual turnover of ₹1-1.5 crore or more, while peer-to-peer transfers and payments to small merchants would remain free, ET reported.
“Consumers will not be charged anything for making UPI payments,” Nigam said in a post on social media platform X on Saturday. Mathur, meanwhile, said consumers and small merchants should remain protected, but UPI needs sustainable economics.
“Every great digital infrastructure needs a sustainable model behind it-one that enables continuous investment in reliability, security and innovation,” he said, adding that the system could deteriorate without one.
Also Read: NBFC gold loans continue near 70% growth, reach Rs 3.41 lakh crore in June: RBIThe Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026, on August 8 removing the legal bar on banks and payment companies charging MDR on notified digital payment modes. The amendment does not itself impose MDR; it allows the Centre to specify where charges may be permitted. No rate or threshold has yet been finalised.
After the bill was passed, Pine Labs chief executive Amrish Rau had called the move to amend the law “a step in the right direction”, saying reasonable charges could be recovered from merchants on higher-value transactions without affecting customers. Peer-to-peer and consumer payments should continue to carry zero charges, while the industry needs a monetisation model to fund technology, innovation and cybersecurity, he said.
Industry body, PCI on Friday backed MDR for larger businesses, saying the revenue would help banks and payment companies fund technology and fraud prevention. Small businesses should remain exempt.