The government on Wednesday rejected claims that the decision to introduce a Merchant Discount Rate (MDR) on certain high-value UPI transactions was driven by foreign influence, as Leader of Opposition in the Lok Sabha Rahul Gandhi demanded that the Centre immediately roll back the new fee.
The Ministry of Finance, in a post on X, said claims of foreign influence behind the change were false and stressed that India's UPI policy decisions were made independently.
“Some claims suggest the change is due to foreign influence. This is false. India's UPI policy decisions are made independently, with the clear goal of building a self-sustaining, inclusive, and affordable digital payments ecosystem,” the ministry said.
The ministry's post did not specifically refer to the United States, Gandhi, however, has alleged that the new UPI charges were linked to US interests and accused Prime Minister Narendra Modi of “lying down in front of Trump”.
In a video message on Wednesday, Gandhi called on Modi to have a “spine” and roll back what he described as a “UPI tax”. He alleged that the government had put a tax on “every single Indian person” by imposing charges on UPI transactions and claimed that the move would result in a large amount of money going to the United States.
Gandhi also questioned why the government was ending the zero-MDR regime for UPI, arguing that the Centre should bear the cost of maintaining the digital payments infrastructure rather than imposing charges on transactions.
The Opposition has stepped up criticism of the new framework since the National Payments Corporation of India (NPCI) announced that a 0.4 per cent MDR would apply to person-to-merchant UPI transactions above Rs 2,000. The new framework is scheduled to come into effect from October 15.
Under the framework, however, UPI will remain free for consumers. Person-to-person transfers will continue to attract no charges, regardless of the amount.
The Finance Ministry said vendors earning up to Rs 1 lakh per month through UPI QR codes would continue to enjoy zero charges. It also said more than 95 per cent of merchant payments are below Rs 2,000 and that these transactions would remain free.
For merchant transactions above Rs 2,000, an MDR of 0.4 per cent will be charged to merchants. The ministry said the rate was significantly lower than charges associated with credit cards and other payment networks.
For essential services such as railways, fuel, telecom, bill payments and insurance, transactions above Rs 2,000 will attract a flat fee of Rs 5 per transaction. Mutual fund and securities payments will carry an MDR of 0.02 per cent, capped at Rs 300.
The ministry said banks had been instructed to ensure that merchants do not pass the MDR cost on to customers. It also said UPI apps cannot levy platform charges.
The government has defended the new framework as necessary to make the UPI ecosystem financially sustainable as transaction volumes continue to grow. The Finance Ministry said the resources generated from higher-value merchant transactions would be reinvested in digital payment infrastructure and cybersecurity, as well as in supporting small merchants in Tier III to Tier VI towns and rural areas.
It also said the funds would support awareness initiatives and incentives aimed at expanding UPI adoption.
“Since its launch in 2016, UPI has grown into the world's largest real-time interoperable payment system,” the ministry said, adding that UPI processed 24.5 billion transactions in August 2026 alone.
The government's clarification came as opposition to the new MDR framework intensified. Retailers and financial-sector participants have also raised concerns about the impact of the charges, particularly on high-value transactions.
Government sources have meanwhile indicated that there is no plan to roll back the 0.4 per cent MDR on UPI merchant transactions above Rs 2,000.
(With inputs from PTI)
