The government has introduced amendments to the Payment and Settlement Systems Act, paving the way for Merchant Discount Rate (MDR) on UPI payments. No final decision has been taken yet.The government has moved a step closer to reintroducing Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions by introducing amendments to the Payment and Settlement Systems Act in Parliament, according to a Reuters report.The amendment, tabled by Finance Minister Nirmala Sitharaman on Tuesday, provides the legal framework for imposing MDR on digital payments. However, sources said no final decision has been taken on whether the fee will be introduced, its rate or the categories of merchants that would be covered.UPI, one of the world’s largest real-time payment systems, processed 23.6 billion transactions worth Rs 29.9 trillion in July, according to official data. PhonePe and Google Pay remain the dominant players on the platform.Industry executives have argued that payment companies earn no revenue from UPI transactions, making it difficult to sustain investments in digital payments infrastructure.According to sources, policymakers are considering two options—charging MDR on transactions above a specified threshold or levying fees based on a merchant’s annual turnover.One proposal under consideration would impose an MDR of 0.3% to 0.5% on UPI transactions exceeding Rs 2,000 for merchants with an annual turnover above Rs 1.5 crore, while keeping payments free for consumers and small businesses.A Jefferies report said transactions above Rs 2,000 account for only 4% of merchant payment volumes but nearly 67% of transaction value. The brokerage estimated that such a move could create a revenue pool of Rs 5,000 crore to Rs 10,000 crore for the payments industry, benefiting companies such as Paytm and Pine Labs.The Finance Ministry, the Reserve Bank of India and the National Payments Corporation of India have not yet commented on the proposed changes.