Finance Minister Nirmala Sitharaman has clarified that any merchant discount rate (MDR) on UPI transactions, if introduced in the future, will be applicable to merchants and not customers, pushing back against claims that ordinary users would be levied charges for using the digital payment platform. She added that MDR charge would support banks and fintech to invest more on infrastructure and security.
In a post on X on Thursday, Sitharaman said, “Merchant Discount Rate (MDR) applies only on the merchants and not on the end users/customers. It will support the Banks & Fintech to invest more on infrastructure, innovation & security. All users of UPI will reap the benefits of this investment.”
More importantly, she added, the UPI and Services Steering Committee headed by NPCI is yet to decide on the MDR. The matter would be considered only after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026.
Her remarks came in response to Congress leader Jairam Ramesh, who alleged that the proposed legal changes could eventually burden UPI users with additional charges.
MDR decision only after law is passed
Lok Sabha on Thursday passed a bill to amend the Payment and Settlement Systems Act, 2007, which authorises the government to permit banks and other service providers to levy charges on payments through unified payments interface (UPI) and other notified electronic payment modes.According to Sitharaman, the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), will decide on the issue after the legislation is enacted.She also criticised the Congress for disrupting Parliament during the ongoing Monsoon Session, saying the proposed legislation could have been debated in the House.
“The Bill could have been discussed on the floor of the House if your party @INCIndia engages constructively in Parliament when the Bill was/is tabled. (LS/RS respectively),” she said.
What does the Bill propose?
The Taxation and Other Laws (Amendment) Bill, 2026 seeks to amend Section 10A of the Payment and Settlement Systems Act, 2007. The proposed amendment would empower the Central government to notify which electronic payment modes or categories of transactions should remain free of charges.
The Bill does not itself introduce an MDR or prescribe any fee on UPI or RuPay transactions. Instead, it provides the legal framework that would allow the government to revise the existing zero-MDR policy through a future notification.
Meanwhile, think tank GTRI on Thursday said India must not rewrite its UPI policies under US pressure, and it must defend competition, policy autonomy and the long-term sustainability of its payments ecosystem.
GTRI said that at present, banks and payment-system providers cannot directly or indirectly charge users for prescribed payment methods, including UPI and RuPay debit cards.
It said that zero MDR contributed significantly to this growth by allowing consumers, small shops and roadside vendors to make and receive payments without transaction charges.
