Union Finance Minister Nirmala Sitharaman has said that the new Merchant Discount Rate (MDR) applicable to certain UPI transactions will not result in an additional charge for consumers.
Her remarks came amid a political dispute over the new UPI payment framework, with opposition parties raising concerns about the impact of the MDR system.
UPI Users Will Not Pay MDR
Sitharaman said MDR is a fee within the digital payment ecosystem and is not a tax or cess collected by the government. She said the charge is meant to support payment service providers and improve the UPI system.
Under the revised framework, eligible Person-to-Merchant UPI transactions above Rs 2,000 will attract an MDR of 0.4 per cent. However, the government has stated that the cost should not be passed on to customers.
Most UPI Payments Remain Unaffected
The new framework does not apply to Person-to-Person transactions, meaning people can continue sending money to friends and family through UPI without MDR. Payments to merchants up to Rs 2,000 will also remain outside the new charge structure.
The government has said around 96 per cent of merchant UPI transactions will remain unaffected.
MDR Applies to Eligible Merchant Payments
The 0.4 per cent MDR will apply to specified merchant transactions above Rs 2,000 from October 15, 2026. The charge will be capped at Rs 300 for transactions of Rs 75,000 and above.
MDR is distributed among participants in the payment ecosystem, including banks and payment application providers, rather than being collected as government revenue.
Sitharaman Responds to Opposition Criticism
Sitharaman said she had already clarified the issue in Parliament and accused opposition parties of creating confusion over the new system. She maintained that consumers should not be made responsible for the MDR applicable within the payment ecosystem.
The Finance Minister also commented on the controversy surrounding mimicry at Congress leader Rahul Gandhi’s ‘Chhatron Ki Goonj’ event in Indore, saying she considered the incident inappropriate given the constitutional position of the Leader of the Opposition.
