The government has dismissed the opposition’s allegation that the MDR on UPI payments was introduced to favour American card companies.
Published: September 16, 2026, 7:51 PM IST
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Starting October 15, an MDR fee of 0.4 per cent will apply to UPI transactions exceeding Rs 2,000Representational image
The Centre on Wednesday pushed back against claims that introducing a Merchant Discount Rate (MDR) on UPI payments was driven by foreign influence, after the opposition alleged the decision was meant to appease US President Donald TrumpThe Finance Ministry clarified that UPI policy calls were made “independently” and reiterated that the service would stay free for consumers.
The Finance Ministry, via a post on X, said the move was driven by the goal of creating a “self-sustaining, inclusive, and affordable digital payments ecosystem,” adding that the decision was taken independently and calling allegations of foreign influence baseless.
UPI Continues to Remain Free for Peer to Peer Transactions and 96% of Merchant Transactions
The new UPI framework introduced has no impact on any person to person transactions
UPI will continue to remain completely free for all person-to-person transactions,… pic.twitter.com/lYVzehs6lU
— Ministry of Finance (@FinMinIndia) September 15, 2026
“Some claims suggest the change is due to foreign influenceThis is falseIndia’s UPI policy decisions are made independently, with the clear goal of building a self-sustaining, inclusive, and affordable digital payments ecosystem,” the statement said.
This clarification comes after Congress alleged the fee was meant to placate US concerns that UPI and RuPay had eaten into Visa and Mastercard’s business.
What is the new fee?
Starting October 15, an MDR fee of 0.4 per cent will apply to UPI transactions exceeding Rs 2,000NPCI has said the charge will be levied on merchants, with consumers remaining unaffected.
For instance, a merchant will pay Rs 40 when it receives a UPI payment of Rs 10,000A shopkeeper or an entity receiving more than Rs 1 lakh per month from customers through UPI is categorised as a merchant.
Also Read | Trouble for Modi government: PIL in Supreme Court challenges charges on UPI payments above Rs 2,000
The MDR fee, however, has been capped at Rs 300 per transactionAmid criticism from the opposition, which has sought its rollback, the Centre reiterated that “person-to-person transfers” would always remain free.
The Finance Ministry also said banks have been instructed to make sure merchants don’t shift the cost onto customers, adding that common UPI uses like sending money or paying at shops will continue to remain without charges.
UPI MDR fee not a tax
Additionally, the Centre clarified that the MDR isn’t a ‘tax’ or a ‘charge’ levied by the government or NPCI, the body that operates UPIRather, the fee will be distributed among ecosystem participants — banks and payment app providers — to help sustain and expand the UPI network.
Until now, the government, banks and payment firms have largely borne the cost of running and expanding the UPI systemThe MDR fee is expected to help cover some of those costs.
