Summary of this article
Finance Ministry rejects US pressure claims over new UPI MDR.
0.4 per cent MDR applies to select UPI payments above Rs 2,000.
Government expects limited impact on cash usage and prices.
The Union Ministry of Finance has rejected allegations that US pressure influenced the decision to introduce a 0.40 per cent merchant discount rate (MDR) on certain Unified Payments Interface (UPI) transactions. The clarification came after concerns were raised over the treatment of foreign payment providers in India’s digital payments system.
The Department of Financial Services (DFS), in a recent post on social media platform X (formerly Twitter), also maintained that the latest National Payments Corporation of India (NPCI) rules do not give international credit cards an advantage over RuPay for credit transactions on UPI.
Why The Government Rejected The US Pressure Claim
The clarification followed observations in the US Trade Representative’s 2026 report regarding the inability of US electronic payment service providers to participate in UPI credit transactions on terms comparable with RuPay.
The finance ministry said that NPCI’s September 15, 2026 circular permits credit transactions on UPI only through RuPay credit cards. According to the ministry, the MDR decision, therefore, does not open the UPI credit segment to foreign card networks.
What The New UPI Charge Means
From October 15, a 0.40 per cent MDR will apply to specified person-to-merchant UPI payments above Rs 2,000. The charge will be paid by merchants rather than consumers and will be capped at Rs 300 for transactions of Rs 75,000 or more.
Person-to-person (P2P) UPI payments will not attract any charge. Payments to merchants up to Rs 2,000 will also be outside the MDR framework, along with transactions covered by the nil-MDR provisions for small merchants. The government estimates that about 96 per cent of merchant transactions will not be impacted.
Government Sees Limited Impact On Cash Use
According to a PTI report, official sources from the finance ministry said that the new charge is unlikely to push users towards cash, as only about 4 per cent of total UPI transaction volume is expected to be covered by the new MDR.
The government also plans to monitor the system to prevent merchants or payment intermediaries from passing the MDR directly to customers. Discussions have been held with payment aggregators and other participants in the UPI ecosystem on this issue.
The ministry also expects limited impact on prices, while RuPay debit card transactions will not attract MDR irrespective of the transaction value.
