Daily Current Affairs 17 September 2026 – IAS Current Affairs

Current Affairs 17  September 2026 focuses on the Prelims-Mains perspective. Major events are :

UPI Merchant Discount Rate (MDR): Who Pays And What Is Exempt?

Source: Indian Express
GS II: Governance- e Governance, Digital Public Infrastructure, Financial Inclusion, GS III: Indian Economy- Banking and Financial Technology

Why in the News?

A new framework for Merchant Discount Rate (MDR) on UPI transactions is set to apply from October 15.

News in Brief

• Under the framework, UPI payments above rupees 2000 made to merchants will generally attract an MDR of 0.4% subject to specified exemptions and special rates.

What is Merchant Discount Rate (MDR)?

• Merchant Discount Rate (MDR) is the fee associated with processing a digital payment made to a merchant.
• It is shared among the different entities that facilitate the transaction, such as banks, payment service providers (PSPs) and third-party payment applicaitons.
• Importantly, MDR is a charge on the merchant side and is not meant to be directly collected from customers making UPI payments.
• Person-to-Person (P2P) UPI transactions are also outside the MDR framework.

Revised MDR Framework

• Transactions up to ₹2,000- UPI person-to-merchant (P2M) transactions up to ₹2,000 will remain free under the revised framework.
• Transactions above ₹2,000- Merchant payments above ₹2,000 will generally attract an MDR of 0.4%.
• High-value transactions- For UPI payments to merchants exceeding ₹75,000, the MDR will be subject to a maximum cap of ₹300 per transaction.

Special Categories and Exemptions

• Not all transactions will be covered by the standard 0.4% MDR.
• Certain categories have been given concessional rates or exemptions.

Essential and priority-related payments

• Transactions involving railways, telecommunications, insurance, fuel, utility bills, education and agricultural inputs will attract a flat MDR of ₹5 per transaction, instead of the standard 0.4%.
• This differentiated treatment recognises the wider public and economic importance of these services.

Financial-market transactions

• Payments related to mutual funds, securities, stockbrokers and dealers will attract a much lower MDR of 0.02%, subject to a ₹300 cap per transaction.

Recurring Payments

• Certain recurring transactions, including monthly utility bills, OTT subscriptions, recurring investments and automated payments, will not attract MDR where they fall within the specified exempt categories.

What about small merchants and street vendors?

• A separate Person-to-Person Merchant (P2PM) category has been introduced for small merchants, including street vendors.
• Merchants receiving up to ₹1 lakh per month through UPI QR codes into their personal bank accounts will not be charged MDR under this category, subject to the applicable conditions.

Monitoring of transaction volumes

• Banks and payment service providers will monitor the monthly inflows into such accounts.
• If a merchant receives more than ₹1 lakh per month for three consecutive months, the account may be shifted to the regular Person-to-Merchant (P2M) category.
• Once classified as P2M, the applicable MDR will be charged on transactions above ₹2,000.

How India uses UPI

The growth of UPI reflects its widespread adoption for both person-to-person (P2P) and person-to-merchant (P2M) payments.

• • P2M transactions account for a larger share by volume, reflecting the widespread use of UPI for everyday purchases and payments to merchants.
  • P2P transactions account for a larger share by value, indicating that individual-to-individual transfers generally involve higher-value payments.
  • High-value P2M transactions form a small share of transactions by volume but contribute significantly to the overall value of merchant payments.
  • The growing scale of UPI demonstrates its importance in India’s digital payment ecosystem, financial inclusion and Digital Public Infrastructure.

Will consumers have to pay more?

• The government has advised banks to ensure that merchants do not pass the MDR cost directly on to consumers.
• UPI application providers have also been directed against imposing additional platform fees or hidden charges in connection with these transactions.
• However, concerns remain regarding the possible response of smaller and informal merchants.
• Some merchants may attempt to recover the additional cost from customers, while others could prefer cash transactions if digital payments become more expensive.
• This makes effective monitoring and enforcement important.
• The NPCI has maintained that the proposed UPI MDR is still considerably lower than charges associated with credit cards and applies only to transactions crossing specified thresholds.
• On this basis, there is limited justification for merchants to increase retail prices.

Reasons to introduce MDR on UPI

• UPI may appear to be a simple payment mechanism from the user’s perspective, but its operation involves considerable infrastructure and recurring costs.
• These include:
  • Payment-processing infrastructure
  • Cloud and data storage
  • Network maintenance
  • Cybersecurity and transaction processing
  • Payment applications
  • Customer-support systems
• The payment ecosystem has been bearing substantial costs associated with maintaining this infrastructure.

Rationale for MDR

• Introducing MDR can help create a mechanism to:
  • Compensate entities involved in facilitating digital payments.
  • Support the long-term sustainability of the UPI ecosystem.
  • Provide resources for continued investment in payment infrastructure and technology.
• Thus, the issue is not merely about imposing a transaction fee; it also concerns the financial sustainability of India’s rapidly expanding digital-payment infrastructure.

Concerns

The proposed MDR framework raises several issues that are relevant to India’s digital economy.

• Cost of digital payments
  • UPI has become associated with low-cost and convenient digital payments.
  • The introduction of charges on certain merchant transactions could change this cost structure.
• Impact on small businesses
  • Small merchants often operate with limited margins.
  • Even a relatively small transaction cost could affect their willingness to accept digital payments.
• Possibility of greater cash usage
  • If merchants consider digital payments more expensive, some may encourage customers to use cash instead.
  • This could affect the pace of India’s transition towards a less-cash economy.
• Financial inclusion
  • UPI has made digital payments accessible to a wide range of consumers and small businesses.
  • Any change in transaction costs therefore needs to be considered alongside the objective of digital financial inclusion.
• Sustainability of Digital Public Infrastructure
  • At the same time, UPI requires continuous investment in technology, security and payment infrastructure.
  • Ensuring the financial sustainability of this ecosystem is important for its long-term functioning.

The policy challenge is therefore to balance affordable digital payments, merchant interests and the sustainability of payment infrastructure.

MDR: UPI vs Card Payments

• The MDR proposed for certain UPI transactions remains lower than the charges generally associated with card payments.
• According to the article:
  • Credit-card transaction charges can generally range from around 1% to 3%.
  • Debit-card MDR is capped at 0.90%.
• Therefore, the UPI framework has a different cost structure from conventional card-based payments, while retaining lower charges for several categories of transactions.

Conclusion

The introduction of MDR on selected UPI transactions reflects the need to make India’s digital payment ecosystem financially sustainable while keeping digital payments affordable and inclusive.

A carefully designed framework with exemptions for essential services and protection for small merchants can help balance merchant interests, consumer affordability and the long-term sustainability of Digital Public Infrastructure.

UPSC Prelims and Mains Practice Question

Consider the following statements regarding Merchant Discount Rate (MDR) on UPI transactions:

1. MDR is a fee associated with facilitating merchant digital-payment transactions.
2. Person-to-person UPI transactions are subject to the proposed 0.4% MDR.
3. Small merchants receiving up to ₹1 lakh per month through specified UPI QR transactions can fall under the P2PM category.

Which of the statements given above is/are correct?

A. 1 and 2 only
B. 1 and 3 only
C. 2 and 3 only
D. 1, 2 and 3

Answer: B. 1 and 3 only

Mains Practice Question

Q) The introduction of Merchant Discount Rate (MDR) on certain UPI transactions reflects the challenge of banking affordability with the financial sustainability of India’s digital payment infrastructure. Discuss. (250 words)

Inter-State Disputes And Cooperative Federalism

Source: Indian Express
GS II: Functions and responsibilities of the Union and States, issues and challenges pertaining to the federal structure, Governance

Why in the News?

An opinion article by Assam Chief Minister Himanta Biswa Sarma discusses recent efforts to resolve long-pending inter-State and Centre-State disputes through dialogue, negotiated settlements and cooperative federalism.

News in Brief

• The Bihar–Jharkhand Sone River water-sharing agreement ended a dispute that had continued for nearly 25 years.
• Other agreements mentioned include the Kishau Multipurpose Project, Upper Yamuna Basin agreement, settlement of outstanding dues under the Narmada Award, and agreements concerning the Northeast.
• In the Northeast, agreements relating to Assam–Nagaland, Assam–Meghalaya and Assam–Arunachal Pradesh are presented as examples of dialogue-based conflict resolution.
• The broader issue is linked to cooperative federalism, Centre-State relations, water governance and regional development.

Cooperative Federalism

• The issue highlights the importance of cooperation between the Centre and the States in addressing disputes and achieving development.
• Instead of allowing differences to remain unresolved, dialogue and negotiation can help governments arrive at mutually acceptable solutions.
• Cooperative federalism involves,
  • Regular coordination between the Union and State governments
  • Dialogue between States on issues affecting their common interests.
  • Joint efforts in implementing major development projects.
  • Equitable sharing of water and other natural resources.
  • Use of institutional mechanisms to resolve disputes.
• The NITI Aayog Governing Council provides an important platform for discussions between the Centre and the States on development and policy issues.

Recent Inter-State Agreements

Several long-pending disputes and development-related disagreements have recently moved towards settlement.

Kishau Multipurpose project

• The project involves Himachal Pradesh, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh and Delhi.
• Differences among the concerned governments had delayed the project for several years.
• Renewed discussions have helped revive the project.

Upper Yamuna Basin

• Haryana and Rajasthan have moved towards resolving issues related to the 1994 Upper Yamuna Basin agreement.
• Such arrangements are important for the equitable use of shared river waters.

Narmada-related settlement

• Maharashtra, Gujarat, Madhya Pradesh and Rajasthan reached a one-time settlement concerning outstanding dues under the Narmada Award.
• The settlement helps remove an issue that had remained unresolved for several decades.

Sone River dispute

• Bihar and Jharkhand reached an agreement to resolve their long-standing dispute over the sharing of Sone River waters.
• The agreements provides for the distribution of the former undivided Bihar allocation between the two States.

Assam-Nagaland Dispute

The Assam-Nagaland boundary dispute is an example of a long-standing inter-state issue involving both territorial claims and natural resources.

• The boundary dispute has its roots in historical administrative boundaries and differing territorial claims.
• Disagreements over the dispute areas have also affected resource exploration and development.
• A tripartite Memorandum of Understanding (MoU) involving the Centre, Assam and Nagaland seeks to create a framework for cooperation.
• The two States have also agreed to a 50:50 sharing arrangement for hydrocarbon revenue, irrespective of the final outcome of the boundary negotiations.
• This shows that resource-sharing and confidence-building measures can support the larger process of resolving territorial disputes.

Other Northeast Peace and Boundary Agreements

• The efforts taken to address conflicts and disputes in the Northeast, including,
• • Bodo Peace Accord
  • Karbi Anglong settlement
  • Assam-Meghalaya boundary agreement
  • Assam-Arunachal Pradesh boundary settlement
  • Frontier Nagaland arrangement
• These agreements reflect the use of dialogue, negotiation and political settlements to address long-standing regional issues.
• They are also relevant to the broader themes of peace-building, regional development and national integration.

Why do inter-State disputes persist?

Inter-State disputes often continue for years because they involve a combination of historical, political, economic and resource-related interests.

Competition over natural resources

• States may have competing claims over,
• • River waters
  • Minerals
  • Hydrocarbons
  • Forest resources
• Since these resources directly affect agriculture, industries and State revenues, governments may find it difficult to compromise.

Boundary Disputes

• Many boundary disputes are linked to,
  • Historical administrative boundaries
  • Reorganization  of States
  • Differences in interpretation of old maps and records.
  • Unclear demarcation of boundaries.

Political Considerations

• State governments may face political pressure to protect their territorial or resource interests.
• This can make negotiations more difficult, particularly when a compromise is perceived as affecting local interests.

Economic Interests

• Disputes over resources and development projects can have significant financial implications for States.
• Revenue from minerals, hydrocarbons, water resources or infrastructure projects can therefore become a major source of disagreement.

Institutional and Procedural Delays

• Disputes may remain unresolved because negotiations, tribunals and judicial proceedings can take considerable time.
• Even after an agreement is reached, implementation can sometimes become another challenge.

Importance for Indian Federalism

Strengthening Cooperative Federalism

• The resolution of long-standing disputes through negotiation demonstrates the importance of consultation and consensus in a federal system.

Promoting Development

• Unresolved disputes can hold up important projects related to:
  • Irrigation
  • Hydropower
  • Drinking water
  • Roads and infrastructure
  • Natural-resource development
• Resolving such disputes can allow development projects to move forward and improve the utilization of shared resources.

Strengthening National Integration

• When States resolve territorial and resource disputes through dialogue, it can improve mutual trust and strengthen the functioning of India’s federal system.

Supporting Northeast Development

• Peace agreements and boundary settlements can create a more stable environment for infrastructure development, investment, connectivity and economic activity in the Northeast.

Improving Governance

• Long-running disputes consume administrative resources and can delay welfare and development programmes.
• Timely resolution allows governments to focus on broader development priorities.

Constitutional and Institutional Framework

• Article 262
  • Article 262 deals specifically with the adjudication of disputes relating to the waters of inter-State rivers or river valleys.
  • Parliament can provide a legal framework for resolving such disputes and can also provide for restricting the jurisdiction of courts in such matters.
• Inter-State River Water Disputes Act, 1956
  • The Act provides a mechanism for adjudicating disputes relating to the sharing of waters of inter-State rivers when negotiations between the concerned States fail.
• Article 131
  • Article 131 gives the Supreme Court original jurisdiction in certain disputes involving the Union and States or disputes between two or more States, where the dispute involves a question of law or fact on which the existence or extent of a legal right depends.
• Article 263
  • Article 263 provides for the establishment of an Inter-State Council to promote coordination between States and between the Centre and States.
  • Its functions can include:
    • Inquiring into and advising on disputes between States.
    • Discussing subjects of common interest.
    • Making recommendations for better coordination of policy and action.
• Zonal Councils
  • The Zonal Councils were created under the States Reorganization Act, 1956.
  • They provide a platform for States within different zones to discuss issues relating to economic and social planning, border disputes and other matters of common interest.

Challenges in Inter-State Dispute Resolution

Despite progress in some areas, several challenges remain,

• Different political priorities of State governments.
• Competing claims over water and natural resources.
• Historical ambiguities in State boundaries.
• Delays in negotiations and adjudication.
• Difficulties in implementing agreements after they are signed.
• Concerns of local communities and stakeholders.
• The need to balance State autonomy with wider national interests.
• Lack of a uniform mechanism for resolving all types of inter-State disputes.

Conclusion

Resolving inter-State disputes through dialogue, negotiation and institutional cooperation can strengthen India’s federal structure. Sustained cooperation between the Centre and States is essential to ensure that differences over resources, boundaries and development do not hinder inclusive growth, national integration and the goal of Viksit Bharat.

UPSC Prelims and Mains Practice Question

Consider the following statements regarding inter-State disputes in India:

1. Article 262 deals with adjudication of disputes relating to waters of inter-State rivers and river valleys.
2. Article 263 provides for the establishment of an Inter-State Council.
3. Zonal Councils were created under the Constitution of India.

Which of the statements given above is/are correct?

A) 1 and 2 only

B) 2 and 3 only

C) 1 and 3 only

D) 1, 2 and 3

Answer: 1 and 2 only.

Mains Practice Question

Q) Cooperative federalism can provide an effective framework for resolving long-standing inter-State disputes in India. Discuss with suitable examples. (250 words)

India Seeks Safeguards For WTO Plurilateral Agreements

Source: Indian Express
GS II: Important International Institutions, agencies and fora – their structure and mandate.

Why in the News?

India has proposed a framework for integrating plurilateral trade agreements into the World Trade Organizations (WTO) system.

News in Brief

• The proposal comes after India had earlier opposed plurilateral agreements at the WTO’s 14th Ministerial Conference in Cameroon.
• India has stressed that Special and Differential Treatment (S&DT) must remain central to WTO rule-making.
• India has also raised concerns that the proliferation of plurilateral initiatives could place additional pressure on WTO resources and its limited budget.
• The change in India’s position follows the BRICS summit and recent bilateral engagement with China, according to the report.

What are Plurilateral Trade Agreements?

• A plurilateral trade agreement is an agreement involving a group of WTO members on a particular subject, rather than the entire WTO membership.
• Unlike multilateral agreements, which seek participation of all WTO members, plurilateral agreements allow interested members to negotiate rules in specific areas.
• Examples
  • Some WTO agreements with limited participation have historically existed in areas such as,
    • Government procurement
    • Trade in civil aircraft
    • Information technology-related trade
  • More recent plurilateral negotiations have also focused on areas such as e-commerce, investment facilitation and domestic regulation of services.

Why has India been cautious about Plurilateral Agreements?

India’s concerns are largely related to inclusiveness, development interests and the WTO’s institutional balance.

Risk of marginalization

If a group of developed economies establishes rules through plurilateral initiatives, developing countries that do not participate may have limited influence over the emerging rules.

Impact on policy space

India has traditionally argued that developing countries require sufficient policy space to pursue food security, livelihood protection and development objectives.

Public Stockholding for Food Security

• India’s public stockholding programme has been opposed by some developed countries on the grounds that it can distort international trade.
• India therefore remains concerned that new plurilateral rules could indirectly affect important programmes relating to food security and agriculture.

Unequal negotiating capacity

Developing and least-developed countries may have fewer financial, technical and institutional resources to participate simultaneously in multiple negotiations.

India’s Proposed Safeguards

• India’s submission to the WTO General Council emphasizes the need for a common understanding on safeguards before plurilateral initiatives become part of the WTO framework.
• Such safeguards could:
  • Provide greater predictability to participating countries.
  • Allow non-participating members to understand and protect their rights and interests.
  • Ensure that existing WTO mandates are not undermined.
  • Preserve the member-driven and inclusive nature of the WTO.
  • Prevent the rights of non-participating members from being prejudiced.
  • Clarify the institutional relationship between plurilateral initiatives and the WTO.
• India has stated that while non-participation should remain a legitimate exercise of a member’s rights, it should not prejudice the rights or interests of countries that do not participate.

Institutional Concerns

• India has highlighted that plurilateral initiatives may have implications for,
  • Existing rights and obligations of WTO members.
  • The functioning of WTO bodies
  • Negotiating interests of individual members
  • The operation of the multilateral trading system.
  • Allocation of WTO resources.
• India has also warned that proliferation of plurilateral agreements could put pressure on the WTO’s limited budget and resources.
• Resources could potentially be diverted from mandated functions such as,
  • Technical assistance
  • Capacity building
  • Development-related support
  • Other priorities of developing and last-developed members.

Special and Differential Treatment (S&DT)

• India has stressed that Special and Differential Treatment should remain central to WTO rule-making.
• S&DT provisions provide developing and least-developed countries with flexibilities such as:
  • Longer implementation periods.
  • Technical assistance.
  • Greater flexibility in implementing certain WTO commitments.
  • Special consideration of their development needs.

Multilateralism vs Plurilateralism

The challenge is therefore to find a mechanism through which plurilateral initiatives can coexist with the multilateral WTO system without undermining the rights of non-participants.

Key Issues for India

• Food Security- India’s public stockholding programmes are closely connected with its concerns about WTO agricultural rules and food security.
• Development concerns- Developing countries need policy space to address poverty, employment, food security and structural transformation.
• WTO Reform- The debate forms part of the larger discussion on how to make the WTO more effective while retaining its multilateral character.
• Resource constraints- A growing number of plurilateral initiatives could increase administrative and financial demands on the WTO.
• Inclusive decision-making- India wants the interests of countries that do not participate in particular agreements to remain protected.

India’s Position

India’s approach seeks to maintain a balance between protecting the multilateral and development-oriented nature of the WTO and allowing groups of willing members to pursue plurilateral trade agreements in specific areas.

India has not completely rejected plurilateral initiatives. Instead, it has called for clear safeguards and common rules to ensure that such agreements do not affect the rights and interests of countries that choose not to participate. This approach aims to allow flexibility in WTO negotiations while preserving the interests of developing and least-developed countries.

Conclusion

WTO reform needs to balance flexibility in trade negotiations with inclusiveness and development concerns. India’s proposal seeks to ensure that plurilateral agreements can move forward without weakening the rights of non-participating members.

A transparent and inclusive framework can help the WTO remain relevant while addressing the diverse interests of its membership.

UPSC Prelims and Mains Practice Question

Consider the following statements regarding plurilateral trade agreements:

1. They are negotiated and implemented by a group of WTO members rather than necessarily by all members.
2. India has raised concerns that such agreements could affect the interests of developing and least-developed countries.
3. India has argued that Special and Differential Treatment should remain central to WTO rule-making.

Which of the statements given above are correct?

(a) 1 only
(b) 1 and 2 only
(c) 2 and 3 only
(d) 1, 2 and 3

Answer: (d)

Mains Practice Question

Q) Plurilateral trade agreements can provide flexibility in global trade negotiations but may also raise concerns regarding inclusiveness and the interests of developing countries. Discuss India’s concerns and its proposed safeguards within the WTO framework. (250 words)

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