“UPI Policy Decisions Are Made Independently”: Government Rejects ‘External Pressure’ Claims On MDR

New Delhi: The Centre on Wednesday rejected allegations that the decision to introduce a Merchant Discount Rate (MDR) on certain UPI merchant transactions was influenced by pressure from the United States, asserting that India’s digital payments policies are formulated independently.
The Finance Ministry dismissed claims of foreign influence, stating that the objective of the revised framework is to create a financially sustainable, inclusive and affordable digital payments ecosystem.
The clarification came after Congress leaders questioned whether the introduction of a 0.4 per cent MDR on specified merchant transactions above Rs 2,000 was linked to demands from the United States or aimed at creating more space for international card payment companies to compete with UPI.
Congress leaders referred to earlier comments by the United States Trade Representative regarding India’s zero MDR policy and argued that the cost of maintaining the UPI ecosystem could be managed through other financial mechanisms. They also linked the issue to broader India-US economic and trade discussions.
The government, however, maintained that the decision was based entirely on domestic policy considerations and not external factors.
Under the new framework, the 0.4 per cent MDR will come into effect from October 15 for specified merchant transactions exceeding Rs 2,000. The charge applies within the merchant payments ecosystem and is not levied directly on consumers.
The Finance Ministry reiterated that person-to-person UPI transfers will remain free and that customers will not face any charges while making eligible UPI payments. The ministry also said users will continue to enjoy unlimited free usage without monthly limits or restrictions.
The announcement has triggered a political debate, with the Congress criticising the move and questioning the rationale behind the fee. The BJP has rejected these allegations and accused the Opposition of spreading misinformation regarding consumer charges.
The introduction of MDR marks a significant change in India’s digital payments landscape, as policymakers seek to balance the rapid growth of UPI with the need to create a sustainable framework for banks, payment service providers and merchants.