New Delhi, September 16, 2026: The government on Wednesday rejected claims that foreign pressure influenced its decision to introduce a Merchant Discount Rate (MDR) on certain Unified Payments Interface (UPI) merchant transactions, saying its digital payment policies were decided independently.
The clarification came after critics of the move, including the Congress, accused the government of introducing the fee to favour the US. Congress leader Rahul Gandhi accused the government of “lying down in front of US President Donald Trump” and burdening “every single Indian person” with a ‘UPI tax’.
Claims Of Foreign Influence False
The Ministry of Finance said the revised framework was aimed at building a digital payments ecosystem that could sustain itself while remaining inclusive and affordable.
“Some claims suggest the change is due to foreign influence. This is false. India’s UPI policy decisions are made independently, with the clear goal of building a self-sustaining, inclusive, and affordable digital payments ecosystem,” the Ministry of Finance said.
The government reiterated that UPI would remain free for consumers and that person-to-person (P2P) transfers would carry no charge, irrespective of the amount.
Small Merchants, Everyday Payments Remain Free
Small merchants earning up to Rs 1 lakh a month through UPI QR codes will continue to face zero charges under the new framework.
Merchant payments of up to Rs 2,000 will also remain free. The government said more than 95 per cent of merchant payments fall below this threshold and would therefore remain unaffected.
For merchant transactions above Rs 2,000, an MDR of 0.4 per cent will apply and will be borne by merchants. The government said the rate was significantly lower than credit-card charges and other network fees.
Official information released by the Finance Ministry separately said approximately 96 per cent of person-to-merchant transactions would remain unaffected under the framework.
Rs 5 Fee For Essential Services
For railways, fuel, telecom, bill payments, insurance and other essential services, a flat fee of Rs 5 will apply to transactions above Rs 2,000.
Mutual fund and securities payments will attract an MDR of 0.02 per cent, capped at Rs 300.
The government said the introduction of a fee on higher-value merchant transactions was intended to make the UPI ecosystem self-sustainable while ensuring it remained secure and innovative.
MDR is not a tax or a charge collected by the government or the National Payments Corporation of India. Instead, it is distributed among participants in the payments ecosystem, including banks and payment application providers, according to the Finance Ministry.
Higher-Value Transactions To Support UPI Ecosystem
The government said revenue generated from higher-value merchant transactions would help support smaller businesses and strengthen the digital payments infrastructure.
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“The new framework ensures resources from higher-value merchant transactions are reinvested to support small businesses and strengthen digital payments across the country,” the Ministry of Finance said.
The framework does not affect P2P transactions, which will continue to remain free regardless of the amount transferred.
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