Consumer Affairs Ministry Considers Proposal to Make UPI Payments Cheaper Than Credit Cards

New Delhi, May 21, 2025 — In a move aimed at reducing consumer costs and encouraging digital transactions, the Ministry of Consumer Affairs is exploring a proposal to make Unified Payments Interface (UPI) payments cheaper than credit card transactions.

According to sources, the ministry is considering offering direct discounts to consumers who opt for UPI at the point of sale. This would allow merchants to pass on savings from UPI’s zero merchant discount rate (MDR) to customers — potentially making a ₹100 product cost just ₹98 when paid via UPI.

Currently, credit card payments carry a 2–3% MDR, which either reduces merchant profit or is indirectly passed on to buyers. UPI transactions, in contrast, do not carry this fee, making them more cost-effective for both merchants and customers.

Stakeholder Discussions in June

The ministry plans to hold consultations in June with key stakeholders, including:

• E-commerce platforms
• Payment service providers
• The National Payments Corporation of India (NPCI)
• The Department of Financial Services (DFS)
• Consumer rights bodies

A final policy framework could be developed following the meetings.

Pushback from Payment Industry

While the move could benefit consumers, not all stakeholders are aligned. The Payments Council of India has repeatedly urged the government to reintroduce MDR charges for UPI and RuPay debit cards, a request the government has so far denied.

Faster UPI Transactions from June 16

In a related development, NPCI has mandated faster transaction times for UPI. Starting June 16, 2025, UPI payments must be completed within 15 seconds, down from the current 30 seconds. This rule will apply to both financial and non-financial UPI transactions.

UPI’s Rapid Growth

UPI continues to dominate India’s digital payment space. In FY25, it processed 185.85 billion transactions, a 42% increase from the previous year. The total transaction value stood at ₹260.56 trillion, up 30% year-on-year.

During the second half of 2024 alone, UPI recorded 93.23 billion transactions, far surpassing volumes seen on credit card networks.

What Consumers Can Expect

If implemented, the proposed system could:

• Make purchases cheaper via UPI
• Speed up transaction times
• Reduce reliance on credit cards

Consumers are advised to await formal updates following the stakeholder consultations expected next month.