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16 August 2026

UPI transaction charges and cash usage

The topic concerns a specific legislative amendment (Taxation and Other Laws Amendment Bill, 2026) regarding the Merchant Discount Rate, which directly impacts digital payment infrastructure and economic policy.

1 min read Day 8 of 9 2 questions 2 prelims

Notes

  • The Taxation and Other Laws (Amendment) Bill, 2026, allows the government to levy a Merchant Discount Rate (MDR) on UPI and RuPay debit card transactions.
  • Cash with the public is defined as total cash in circulation minus cash held by banks.
  • Growth of cash with the public has increased from 4% in 2023-24 to 12% in 2025-26, reaching 13% growth in 2026-27 (₹41.8 lakh crore as of July 2026).
  • UPI transaction value growth has slowed from 105% in 2021-22 to 20.3% in 2025-26 and 18.7% as of August 2026.
  • Despite the slowdown, UPI transaction growth (18.7%) remains higher than the growth of cash with the public (13%).
  • Experts suggest the simultaneous growth of cash and digital transactions may indicate higher economic activity or potentially understated official inflation data.
  • Government assurances state that the proposed MDR will not apply to the general public but will target specific high-value transactions.
  • Concerns exist that merchants may pass MDR costs to consumers, potentially incentivizing a shift back toward cash usage.

Part of a longer story

This is day 8 of 9 in Taxation and Other Laws (Amendment) Bill, 2026, which has been running since 5 August 2026. Reading it whole is usually worth more than reading today alone — the exam asks how something developed.

Questions

  1. Analyze the implications of introducing a Merchant Discount Rate (MDR) on digital payment platforms like UPI for the government's long-term goal of a less-cash economy. 150 words
    Attempt this — 150 words in 8 min
    0 / 150 words 8:00
  2. Discuss the correlation between the growth of cash in circulation and digital transaction volumes in the context of India's post-pandemic economic recovery. How do these trends challenge the accuracy of current inflation measurement frameworks? 250 words
    Attempt this — 250 words in 11 min
    0 / 250 words 11:00

Prelims

  1. Which of the following best defines 'Cash with the public' as used in RBI data analysis?

  2. The Taxation and Other Laws (Amendment) Bill, 2026, enables the government to levy a charge on which of the following?

Syllabus

Topics

Sources

250words.in · https://250words.in/daily/2026-08-16/upi-transaction-charges-and-cash-usage