UPI MDR: Centre to ensure merchants don’t charge customers

The Centre is considering a monitoring mechanism to ensure merchants do not pass on the new Merchant Discount Rate (MDR) on select UPI transactions to consumers.

The move follows the government’s announcement of a 0.4 per cent MDR on certain person-to-merchant UPI payments above Rs 2,000 from October 15. The Finance Ministry has already started discussions with payment aggregators and other stakeholders in the UPI ecosystem to sensitise them about the new charge and ensure that customers are not made to pay it, according to news agency PTI report.

‘No US pressure’

The Finance Ministry has also rejected allegations that the decision to introduce MDR was taken under pressure from the US.

The Department of Financial Services (DFS) said the latest NPCI guidelines do not give international credit cards an advantage over RuPay.

Also read: UPI MDR unlikely to push up cash transactions: Finance Ministry

The clarification came in response to observations in the US Trade Representative’s 2026 National Trade Estimate Report, which raised concerns over the inability of US electronic payment service providers to participate in the UPI ecosystem, including credit transactions on UPI, on a level playing field with RuPay.

"The NPCI circular of September 15, 2026, does not allow credit transactions on UPI by any other credit card other than the RuPay credit card. There is a clear policy of only allowing RuPay credit cards on UPI to enable RuPay credit cards to become the preferred choice of credit cards amongst users in India," the DFS said in a post on X (Formerly Twitter).

"The allegation that MDR has been introduced under any external influence is patently false and misleading," it added.

The response came after Opposition parties, including the Congress, alleged that the Centre had succumbed to US pressure while deciding to impose the 0.4 per cent MDR.

The USTR report had said US payment service providers faced concerns over policies that appeared to favour Indian domestic suppliers. It also flagged NPCI’s 30 per cent market-share limit for third-party UPI apps.

UPI use unlikely to fall

The government also clarified only around 4 per cent of total UPI transaction volume would be affected by the new charge, according to sources cited by the news agency. They also pointed out that RuPay debit-card transactions will remain completely free, irrespective of the transaction value.

Also read: BJP says Congress ‘hyperventilating’ on UPI MDR; ‘6 of its MPs part of decision’