Finance Ministry rejects foreign influence claims over UPI MDR, says India's digital payments decisions are made independently

The finance ministry on Wednesday rejected claims that foreign pressure influenced the decision to impose a 0.4% Merchant Discount Rate (MDR) on UPI transactions above Rs 2,000, saying India’s UPI policy is decided independently.

The clarification came after Opposition parties, including the Congress, alleged that the government had acted under US pressure.

Also Read: UPI fee rollback ruled out: 0.4% MDR stays on big payments


"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 said in a post on X.

From October 15, merchants will pay a 0.4% MDR on person-to-merchant UPI transactions above Rs 2,000. The charge will be capped at Rs 300 for transactions of Rs 75,000 or more. Consumers will not pay the MDR.

Most everyday merchant payments and all person-to-person UPI transactions will remain free. Small merchants collecting up to Rs 1 lakh a month through UPI QR codes will also be exempt.

Also Read: UPI transactions above Rs 2,000 to attract 0.4% MDR; check key details

The ministry said MDR is neither a tax nor a charge collected by the government or NPCI. The revenue will be distributed among payment ecosystem participants, including banks and payment application providers.

NPCI said the funds will support infrastructure resilience, cybersecurity, fraud prevention, innovation and customer service.

UPI payments to merchants in rural and semi-urban areas will remain free. Five per cent of MDR collections will go to a dedicated fund to expand UPI acceptance among small merchants.

For essential services such as railways, telecom, fuel and insurance, the MDR will be a flat Rs 5 per transaction above Rs 2,000. Capital market transactions will attract an MDR of 0.02%, capped at Rs 300.

UPI processed 24.5 billion transactions in August 2026. In FY2025-26, it handled 24,161.69 crore transactions worth about Rs 314 lakh crore, compared with 1.78 crore transactions worth Rs 0.07 lakh crore in FY2016-17.

Earlier on Wednesday, government sources said there was no question of reconsidering the MDR decision.

A top official, when asked whether the government was considering a rollback, said a decision had been taken and there was no question of reversing it.