DPI Brief — July 20, 2026

UPI MDR May Return for Large Merchants (L2: Payments)

The government is actively examining a proposal to reintroduce the Merchant Discount Rate (MDR) on UPI transactions for large merchants, marking a potential shift in India’s zero-fee digital payments policy after nearly six years. According to a report in the Economic Times, the levy — pegged at below 0.5% — would apply only to merchants with annual turnover of ₹1–1.5 crore or more, and only on transactions above ₹2,000. Person-to-person transfers and payments to small merchants would remain free.

Multiple industry representations have argued that the zero-MDR regime, while instrumental in driving UPI adoption to 241.62 billion transactions in FY 2025–26, has created an unsustainable cost burden for banks and payment service providers absorbing infrastructure expenses. The proposal awaits final government nod. UPI transactions in July 2026 reached approximately 14.44 billion by volume, with an average daily count of 466 million transactions valued at ₹66,590 crore, according to NPCI data.

ONDC Expands DigiDukaan to Tier-2 Cities (L4: Commerce)

The Open Network for Digital Commerce (ONDC) is pushing into Phase 3 of its merchant expansion, extending its DigiDukaan initiative — designed for India’s general trade ecosystem — into tier-2 cities. DigiDukaan enables kirana stores to digitally procure products across multiple brands and distributors through a single interface. The platform is already live in Hyderabad and Jaipur with over 12,000 retailers onboarded, ONDC’s official Instagram channel noted this week.

Separately, DigiHaat, the government-backed e-commerce marketplace, launched its “Sahkar Se Samriddhi” cooperative store on the ONDC platform. These moves signal ONDC’s strategy to expand beyond its urban early-adopter base into the country’s vast network of small retailers and cooperative societies, aiming to democratise digital commerce infrastructure.

DigiLocker Crosses 900 Crore Documents; Aadhaar Authentications Surge (L1: Identity, L3: Documents)

India’s document infrastructure continues its exponential growth. DigiLocker now hosts over 900 crore issued documents with 70+ crore registered users, the Digital India initiative confirmed this week. Meanwhile, Aadhaar has been authenticated over 17,750 crore times cumulatively. These milestones underscore how deeply identity and document verification layers have penetrated everyday service delivery — from CBSE results stored digitally to DU admissions relying on DigiLocker documents.

The convergence of Aadhaar identity verification and DigiLocker document storage has effectively eliminated paper-based bottlenecks in education, healthcare, and public service delivery for hundreds of millions of citizens.

CERT-In Warns of AI-Driven Cyber Threats (L7: Trust)

CERT-In issued a high-severity advisory titled “Defending Against Frontier AI Driven Cyber Risks,” warning that next-generation AI tools can now autonomously identify software vulnerabilities, analyse source code at scale, and execute multi-stage cyberattacks with minimal human intervention. The advisory noted that micro, small and medium enterprises (MSMEs) are particularly vulnerable due to limited cybersecurity infrastructure.

The agency recommended organisations deploy advanced threat detection, robust patch management, secure coding standards, and AI-aware security frameworks. This advisory is part of a broader trend of India’s cybersecurity establishment grappling with the dual-use implications of frontier AI — the same technology that powers DPI expansion also amplifies threat vectors.

UPI Concentration Persists: Top 3 Players Process 93% of Transactions (L2: Payments)

NPCI data for July showed that the top three UPI apps — PhonePe (48.38%), Google Pay (~37%), and Paytm — processed 93% of all UPI transactions. This persistent concentration has reignited NPCI’s ongoing deliberations on market share caps, though no new regulatory action was announced this week. The data reinforces the tension between UPI’s runaway volume growth and the structural dominance of a handful of platforms in the ecosystem.