The Centre has started talks with payment aggregators and other players in the UPI system to make sure customers do not end up paying the newly introduced Merchant Discount Rate (MDR). The Finance Ministry is also working on a system to monitor how the new fee is being implemented. The aim is to ensure that merchants do not recover the MDR from customers by adding extra charges to UPI payments, PTI reported.
What is the new UPI Charge?
Under the new rules, merchants will have to pay an MDR of 0.4 per cent on UPI payments made for purchases above Rs 2,000 from October 15. Customers will not be directly charged this fee. However, there are concerns that some merchants could increase the price of goods or services or add a separate fee to cover their additional cost.
The MDR will be capped at Rs 300 for transactions of Rs 75,000 or more.
The Finance Ministry has already begun discussions with payment aggregators and other stakeholders to explain the new system and make it clear that the cost should not be passed on to consumers.
Only 4% of UPI transactions expected to be affected
According to government sources, the new MDR is not expected to cause a major change in the way people use UPI. Only around 4 per cent of the total UPI transaction volume is estimated to come under the new charge.
Officials also do not expect the move to lead to a major shift from UPI to cash. RuPay debit card payments will continue to be free, irrespective of the transaction value.
The government also believes the new MDR will not have a noticeable impact on inflation because the transactions covered by the charge make up only a small part of total UPI payments.
Centre rejects US pressure claim
The Finance Ministry has rejected claims that India brought in the new UPI charge because of pressure from the United States. The Department of Financial Services (DFS) said the September 15 circular issued by the National Payments Corporation of India (NPCI) does not give international credit cards any special benefit over RuPay.
At present, RuPay credit cards are the only credit cards that can be used for credit transactions on UPI under the existing system.
“The allegation that MDR has been introduced under any external influence is patently false and misleading,” the DFS said in a post on X.
The statement came after concerns were raised in the US Trade Representative’s 2026 report about the lack of equal access for US electronic payment companies to credit transactions on UPI.
Why has MDR been introduced?
The government has said the new MDR is aimed at creating a more sustainable revenue model for India’s digital payments ecosystem.
While the new fee will apply to certain high-value merchant payments, person-to-person UPI transfers and most routine merchant transactions will continue to remain free.
The Centre’s latest move is aimed at ensuring that the new fee does not result in customers having to pay extra when they choose UPI as their payment method.
(With inputs from agencies)
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