‘No rethink on 0.4% fee for UPI payments above Rs 2,000’, government sources say

Government officials are firmly denying any possibility of reversing the recently announced 0.4% Merchant Discount Rate (MDR) that will apply to UPI transactions exceeding Rs 2,000, according to sources cited by PTI. The charge is set to commence on October 15 and government sources insist the decision has already been made, with no room for reconsideration.

This move, introduced to bolster the safety and security of the UPI ecosystem, is part of the broader aim to make the system financially self-sustaining, similar to practices seen in various other nations. The new framework intends to generate revenue and ensure UPI's long-term viability, while still offering most transactions at no cost.

However, the fee has stirred opposition from traders, shopkeepers, and several Opposition parties, who label it as the "Modi Tax" and accuse Prime Minister Narendra Modi of succumbing to US pressure. The government responded by promising incentives to encourage UPI expansion in rural and semi-urban areas, while maintaining that the majority of payments will continue to be fee-free.

The Parliamentary Standing Committee on Finance had earlier expressed concerns about the sustainability of the zero-MDR model, warning that establishing a viable revenue mechanism is crucial to maintaining financial sustainability without overburdening the government budget.