Payment and Settlement Systems Act, 2007
In one line: The Payment and Settlement Systems Act, 2007 is the law under which the RBI regulates payment systems in India, and its Section 10A is the basis of zero MDR.
What it does
The Act requires payment systems to be authorised. NPCI operates under an authorisation under Section 4 of the Act. The Finance (No. 2) Act, 2019 inserted Section 10A, which bars banks and system providers from levying MDR on payers or merchants using prescribed electronic modes.
Why it is in the news
Under Section 10A and a 2019 notification, BHIM-UPI, BHIM-UPI QR codes and RuPay debit cards were made zero-MDR modes from 1 January 2020. The planned 0.4% fee on larger merchant payments is the first major change to this regime for UPI.
Where to go next
- Merchant discount rate
- National Payments Corporation of India
Payment and Settlement Systems Act, 2007 in the news
- NPCI tells Supreme Court zero-MDR UPI is unsustainable, defends 0.4% merchant fee 6 November 2026
The law behind payment systems.
- NPCI defers 0.4% UPI merchant fee, due on 15 October, until after Diwali 14 October 2026
The law that made UPI free for merchants.
Previous-year questions on this
- 2026 · GS3 · 10 marks Examine the view that financial inclusion is an integral part of social and economic inclusion in a country like India. Also throw light on the usefulness of the R.B.I.'s Financial Inclusion Index.
- 2026 · GS3 · 10 marks What do you mean by Digital Rupee? In this context, explain the working and progress of India's Central Bank Digital Currency (CBDC).
- 2022 · GS3 · 10 marks Is inclusive growth possible under market economy? State the significance of financial inclusion in achieving economic growth in India.
- 2017 · Prelims Which of the following is the most likely consequence of implementing the 'Unified Payments Interface (UPI)'? (a) Mobile wallets will not be necessary for online payments. (b) Digital currency will…