Finance Ministry rejects foreign influence claims over UPI MDR, says India's digital payments decisions are made independently
India's finance ministry rejected claims of foreign pressure influencing UPI transaction charges. A 0.4% Merchant Discount Rate will apply to UPI payments over Rs 2,000. This charge will not affect consumers and most small merchants remain exempt. The revenue will support payment ecosystem participants and infrastructure development. UPI policy decisions are made independently for an affordable…
On Wednesday, the Indian finance ministry dismissed allegations that foreign pressure swayed their decision to impose a 0.4% Merchant Discount Rate (MDR) on UPI transactions over Rs 2,000. The government clarified that India's UPI policies are determined independently, in pursuit of a self-sustaining, inclusive, and affordable digital payments system. A post on X detailed the ministry's stance.
Starting October 15, merchants will face a 0.4% MDR on UPI transactions above Rs 2,000, with a cap of Rs 300 for amounts exceeding Rs 75,000. However, consumers will not be charged the MDR. Most routine merchant payments and person-to-person UPI transactions will continue to be free. UPI QR code merchants handling up to Rs 1 lakh monthly will also be exempt from the MDR.
The finance ministry explained that the MDR is neither a tax nor a government-collected charge but a revenue source for the payment ecosystem, benefiting banks and payment application providers. The Reserve Bank of India's National Payment Corporation of India (NPCI) stated that these funds will be allocated towards infrastructure resilience, cybersecurity, fraud prevention, innovation, and customer service.
Small merchants collecting up to Rs 1 lakh a month via UPI QR codes will also be exempt. UPI payments to merchants in rural and semi-urban areas remain free. Notably, five percent of MDR collections will be directed to a fund aimed at expanding UPI acceptance among small merchants.
Essential services like railways, telecom, fuel, and insurance will see a flat Rs 5 per transaction MDR above Rs 2,000. Capital market transactions will incur an MDR of 0.02%, also capped at Rs 300.
UPI processed 24.5 billion transactions in August 2026, handling 24,161.69 crore transactions worth about Rs 314 lakh crore compared to 1.78 crore transactions worth Rs 0.07 lakh crore in FY2016-17. The government reiterated on Wednesday that there were no plans to reconsider the MDR decision, emphasizing its non-reversibility.
Written by urgent.news from The Economic Times - Economy's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
