India's Finance Ministry on Thursday firmly rejected allegations that external pressure, particularly from the United States, influenced its decision to impose a merchant discount rate (MDR) on certain UPI transactions. The ministry maintained that the policy was conceived entirely on domestic grounds and would not reverse the country's progress toward digital payments.
Under the new framework, effective October 15, a 0.4 percent MDR will be levied on person-to-merchant UPI payments exceeding ₹2,000. For larger transactions of ₹75,000 and above, the fee will cap at ₹300 per transaction. The charge will be collected from merchants and payment intermediaries, not from consumers directly.
The ministry emphasized that the vast majority of everyday UPI payments — including personal-to-person transfers and small-value merchant purchases — will continue to remain free of charge. Only high-value commercial transactions will fall under the new levy.
Officials stated that the introduction of MDR on select transactions is intended to ensure the long-term sustainability of the UPI ecosystem, which has seen explosive growth in recent years. The revenue generated will help payment service providers and banks maintain infrastructure and continue innovating without bearing all costs themselves.
Critics had argued that imposing a cost on digital payments could push merchants and consumers back toward cash, undermining India's rapid financial digitization. The Finance Ministry dismissed this concern, asserting that the threshold of ₹2,000 is high enough that it will not affect routine daily transactions for ordinary citizens.
UPI currently handles billions of transactions every month, making it one of the world's largest real-time payment systems. The move marks the first time India has introduced a small fee on a significant segment of UPI payments since the system's widespread adoption.
