From The Economic Times · Saloni Shukla · · 50s
Government may end UPI subsidies as MDR revenue grows
India's government could stop subsidizing low-value UPI transactions after banks earn revenue from larger payments.
In brief
India's government could stop subsidizing low-value UPI transactions after banks earn revenue from larger payments. UPI subsidies may end as merchant discount rates generate income from high-value transactions. Originally reported by The Economic Times.
UPI subsidies cut
The government may stop subsidizing low-value UPI transactions after banks start earning revenue from larger payments.
“The idea behind introducing MDR on larger value UPI payments was to move the ecosystem away from taxpayer funded subsidies.”
No new subsidies since April 2025
No fresh subsidy payments have been made for transactions since April 2025, as MDR revenue covers the cost.
Subsidy drop in FY25
UPI incentive disbursements fell from ₹3,631 crore in FY24 to ₹1,046 crore in FY25.
MDR revenue plan
The government budgeted ₹2,000 crore for UPI incentives in FY27 but no new subsidies have been paid since April 2025.
Why MDR introduced
MDR was introduced to reduce taxpayer subsidies and encourage small merchants to accept digital payments.
What it means
UPI subsidies may end as merchant discount rates generate income from high-value transactions.
