Lok Sabha's passage of the Payment and Settlement Systems (Amendment) Bill on Thursday marks an important step towards updating India's payments architecture for the next phase of digital growth. The legislation seeks to modernise the country's payments regulatory framework and prepare it for the next phase of innovation and growth. But it has also revived a broader policy debate over the future economics of digital payments, including whether the withdrawal of zero merchant discount rate (MDR) regime that underpinned UPI will now adversely affect one of India's biggest fintech success stories.
The new law now empowers GoI to notify an MDR on UPI and select digital payment modes. Designed to build a sustainable monetisation framework for banks and fintech operators, this legislative update has brought the debate over the future of zero-MDR policies back to the centre of financial policy discussions.
