MDR on UPI will hit businesses, not users: FM Nirmala Sitharaman hits back at Congress' Jairam Ramesh

Finance minister Nirmala Sitharaman on Thursday pushed back against Congress leader Jairam Ramesh's charge that the government's new bill would end free UPI transactions for ordinary users. The finance minister responding to his post on X, insisted that any future merchant discount rate (MDR) would fall on businesses, not customers.

Sitharaman accused the opposition leader of "spreading a canard" and clarified that MDR "applies only on the merchants and not on the end users/customers," adding that the revenue would let banks and fintechs invest in infrastructure, innovation and security, benefits she said would eventually flow to all UPI users.

She also stressed that no decision has been taken yet.


"More importantly, the UPI and Services Steering Committee headed by NPCI is yet to decide on the MDR. This will happen after the Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, which propses to amend Section 10A of the Payment and Settlement Systems Act, 2007," she wrote.

The government will move amendments to the IT Act to make way for the levy of the MDR on UPI transactions, a longstanding demand of the payments industry. ET was the first to report on July 16 that the government could reintroduce MDR on UPI transactions for large merchants. Sources had told us that the Centre is likely to peg the MDR at 5-7 basis points if it is reintroduced.

Taking a swipe at the Congress, she said the matter "could have been discussed on the floor of the House" had the party engaged constructively when the bill was tabled.

In his post, Ramesh had alleged that the bill strips away the statutory guarantee that kept UPI fee-free, calling the government's sustainability argument "entirely wrong" and pointing to the RBI's Rs 2.86 lakh crore surplus transfer to the Centre in 2025-26 as proof that fees weren't necessary.

MDR refers to the fee charged to a merchant by a bank for accepting payments from customers via digital modes like UPI, credit cards, debit cards. This has been zero for UPI transactions since January 2020, when the government amended the rules to make such payments free and drive digital adoption.