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• The Indian government has introduced a bill to amend the Payment and Settlement Systems Act, 2007.
• The proposed amendments aim to reintroduce a Merchant Discount Rate (MDR) on high-value UPI transactions.
• Section 10A of the Act currently prohibits banks from imposing charges on electronic payments like UPI.
• Lawyers should be aware of potential compliance exposure arising from this development.

The proposed provision in Clause 2 of the Bill would allow for the levy of charges on certain electronic modes of payment specified by the government through a notification.

The Indian government has introduced a new bill in parliament to amend the Payment and Settlement Systems Act, 2007. The Taxation and Other Laws (Amendment) Bill, 2026, was presented by Union Minister for Finance and Corporate Affairs Nirmala Sitharaman on Tuesday. The proposed amendments aim to make key changes across several laws, including the Payment and Settlement Systems Act, 2007, the Income Tax Act, 2025, and the Finance Act, 2026.

According to multiple news reports, the government seeks to reintroduce a Merchant Discount Rate (MDR) on high-value UPI transactions. The proposed provision in Clause 2 of the Bill would allow for the levy of charges on certain electronic modes of payment specified by the government through a notification.

The Payment and Settlement Systems Act, 2007, currently prohibits banks from imposing any charge on individuals making or receiving payments through electronic modes like UPI. Section 10A of the Act has been in place since its inception, preventing such charges. However, with the proposed amendments, the government may soon allow for the levy of a merchant fee on high-value UPI transactions. This move could have significant implications for businesses and individuals relying heavily on these services.

The reintroduction of an MDR would mark a shift in policy, as there has been no such charge since January 2020 on RuPay debit cards and UPI transactions.

Lawyers should be aware of the potential compliance exposure arising from this development. The reintroduction of an MDR could impact clients who rely heavily on high-value UPI transactions, making it essential for legal professionals to stay informed about these changes. As the government considers reintroducing a merchant fee, businesses and individuals must prepare for the implications of this policy shift.

The proposed amendments also highlight the ongoing evolution of India's payment systems regulations, underscoring the need for lawyers to remain up-to-date on the latest developments in this area.

Lawyers should watch for potential compliance exposure as the government considers reintroducing a Merchant Discount Rate on high-value UPI transactions, which may impact clients who rely heavily on these services.

Source: Original reporting via multiple news reports