New Delhi: UPI MDR May Be Limited to High-Value Merchant Payments, Government Says

New Delhi, 8th August 2026: The proposed merchant discount rate (MDR) on Unified Payments Interface (UPI) transactions is likely to be nominal and restricted to certain merchant payments above a specified threshold, the government said on Saturday, clarifying that users making person-to-person payments will continue to pay no charges.

The government said there would be no blanket MDR applicable to merchants using UPI. If introduced, the charge would be applicable only to eligible transactions crossing a prescribed value.

“A vast majority of the transactions will remain free of charge for merchants on UPI,” the government said in a statement. It added that any decision on introducing MDR, including its structure and threshold, would be taken by the UPI and Services Steering Committee headed by the National Payments Corporation of India (NPCI).

The clarification comes amid debate over the Centre’s proposal to remove the existing cap on MDR for digital payment instruments, including UPI.

The government also rejected speculation that the proposed change was being introduced because of pressure from the United States. Such claims had surfaced amid concerns that American payment networks Visa and Mastercard, which levy MDR on debit and credit card transactions, were seeking similar treatment for digital payments in India.

MDR on card transactions can be as high as 2% and is generally borne by merchants, although some businesses may pass the cost on to customers, particularly when encouraging cash payments.

Rejecting the allegation of external influence, the government said India’s decision to build and scale UPI had been driven by domestic policy objectives. It pointed out that UPI was launched in 2016 and that transactions were made free for both consumers and merchants from January 2020.

The government said any changes to the MDR framework should instead be viewed as part of efforts to ensure the long-term sustainability of India’s digital payments ecosystem while maintaining competition and expanding access.

According to the Finance Ministry, a revised framework could help support the continued expansion of digital payment infrastructure, particularly in rural and semi-urban parts of the country.

The issue gained renewed attention after Finance Minister Nirmala Sitharaman introduced a Bill proposing changes to the existing restrictions on MDR for digital payment instruments such as UPI.

Government officials have indicated that an MDR in the range of 0.25% to 0.4% could potentially be permitted on qualifying UPI transactions above Rs 2,000. The proposed charge would apply only to merchant transactions and not person-to-person payments, with an upper limit expected to be placed on the amount that can be charged.

The government has maintained that any such framework would be designed to balance the sustainability of the UPI ecosystem with the need to keep digital payments affordable and widely accessible.