New Delhi, Sept. 16 -- The Centre has rejected allegations that the introduction of Merchant Discount Rate (MDR) charges on certain UPI transactions was influenced by foreign pressure or aimed at benefiting American payment companies. The clarification came after opposition leaders accused the government of changing the UPI fee structure to address concerns raised by US companies and President Donald Trump. The government maintained that India's UPI policy decisions are taken independently and are aimed at creating a sustainable, inclusive and affordable digital payments ecosystem.
Under the revised framework, an MDR of 0.4% will apply to specified person-to-merchant (P2M) UPI transactions above Rs.2,000 from October 15, 2026. The charge will be borne within the merchant payment ecosystem and is not a tax collected by the government or the National Payments Corporation of India. The government has also clarified that consumers will not be charged for making UPI payments. Person-to-person (P2P) transactions will continue to remain free, regardless of the amount transferred. Payments made to merchants up to Rs.2,000 will also continue to attract zero MDR.
According to the new framework, transactions above Rs.2,000 made to merchants will attract an MDR of 0.4%, with the charge capped at Rs.300 for transactions of Rs.75,000 and above. Certain categories have separate rates or fixed charges. The government has said the revised structure is intended to provide a sustainable revenue mechanism for participants in the UPI ecosystem while supporting investments in infrastructure, innovation, cybersecurity and customer services. It has also stressed that UPI will remain an affordable digital payment option. The clarification followed criticism from the opposition, which alleged that the move was connected to US concerns over India's digital payments ecosystem and the dominance of UPI and RuPay. Congress leaders claimed that the new fee structure could benefit international card networks such as Visa and Mastercard.
The government has rejected these allegations, stating that the policy was not introduced because of any external influence. It said the objective was to strengthen the long-term sustainability of India's digital payments infrastructure rather than respond to pressure from another country. The new MDR framework is also aimed at distinguishing between everyday low-value payments and larger merchant transactions. According to the government's FAQ, more than 95% of P2M UPI transactions are valued at Rs.2,000 or below and will therefore remain unaffected.
The changes come as UPI continues to handle a rapidly growing volume of digital payments across India. The government has argued that maintaining the system at its current scale requires continued investment in technology, security and operational infrastructure. With the revised MDR framework scheduled to take effect from October 15, the government has reiterated that ordinary consumers will continue to be able to use UPI without paying a transaction fee, while the new charges will apply to specified higher-value merchant payments.
Published by HT Digital Content Services with permission from Millennium Post.