NEW DELHI – India's Finance Minister Nirmala Sitharaman has publicly addressed concerns over potential charges on Unified Payments Interface (UPI) transactions, firmly stating that any proposed Merchant Discount Rate (MDR) would apply exclusively to merchants and not to end-users or customers.
Her clarification came in response to allegations made by Congress leader Jairam Ramesh, who claimed that the government was clearing the path to levy fees on all UPI transactions. Sitharaman dismissed these claims as a “canard,” emphasizing that MDR, if introduced, aims to bolster banks and fintech companies, enabling further investment in critical infrastructure, innovation, and security. Such investments, she noted, would ultimately benefit all UPI users.
MDR Decision Still Pending
Sitharaman further highlighted that the UPI and Services Steering Committee, operating under the National Payments Corporation of India (NPCI), has not yet made a final decision on the implementation of MDR. This crucial step is contingent upon the Parliament's passage of the Taxation and Other Laws (Amendment) Bill, 2026. This Bill seeks to amend Section 10A of the Payment and Settlement Systems Act, 2007, which currently prohibits such charges.
The Finance Minister also criticized the Congress party, suggesting that these matters could have been discussed constructively within Parliament if the party had engaged when the Bill was tabled.
Jairam Ramesh's Allegations
Earlier, Jairam Ramesh had asserted that the proposed amendment would strip away the statutory guarantee ensuring free UPI transactions, thereby opening the door for MDR imposition. He argued that the financial burden would inevitably shift to ordinary users and questioned the government's justification that MDR was essential for UPI's financial sustainability. Ramesh pointed to the Reserve Bank of India's substantial surplus transfer to the government in 2025-26 (₹2.86 lakh crore) as evidence of its capacity to support the UPI ecosystem without additional charges. He also speculated whether the amendment was influenced by criticism from the U.S. Trade Representative regarding India's zero-fee UPI and RuPay system, suggesting pressure from the U.S. government.
Government's Stance on MDR
Sources within the government have consistently clarified that the proposal is not designed to impact individual users or small businesses. Discussions have primarily focused on applying MDR solely to large merchants, including major e-commerce platforms and businesses exceeding a specific annual turnover threshold. Small-value transactions and person-to-person (P2P) UPI payments are expected to remain exempt from any such framework.
These discussions surrounding the reintroduction of MDR have been ongoing for nearly two years. The amendment's purpose is to restore the government's legal authority to levy MDR by removing the existing statutory prohibition. The precise rate, turnover thresholds, and the overall implementation framework will be determined at a later stage, following extensive consultations with industry stakeholders.
What is Merchant Discount Rate (MDR)?
MDR is a fee that merchants pay to banks, payment providers, and other intermediaries for processing digital payment transactions.