Will You Have to Pay for UPI Transactions? Here's What the Government Says
Union Finance Minister Nirmala Sitharaman has clarified that if a merchant discount rate (MDR) is introduced for Unified Payments Interface (UPI) transactions, the charges will apply only to merchants and not to customers.
Addressing concerns surrounding the proposed changes, the finance minister said the move, if approved, would allow banks and fintech companies to invest more in payment infrastructure, cybersecurity measures and technological innovation, ultimately strengthening India's digital payments ecosystem.
However, Sitharaman emphasized that the government has not yet made a final decision on introducing MDR for UPI transactions.
Decision to be taken after Parliament's approval
According to the finance minister, the matter will be considered by the UPI and NPCI Services Steering Committee only after Parliament approves the Taxation and Other Laws (Amendment) Bill, 2026.
The proposed legislation seeks to amend Section 10A of the Payment and Settlement Systems Act, 2007. Sitharaman said any decision regarding MDR will be taken only after the legislative process is completed. ALSO READ: Higher Global Commodity Prices Drive Rise in WPI Inflation, Says Government
What is MDR?
Merchant Discount Rate (MDR) is a fee that banks and payment service providers charge merchants for processing digital transactions. The fee is generally collected from businesses rather than customers.
Sitharaman reiterated that consumers would continue to enjoy free UPI transactions and would not be directly affected if the proposal is implemented.
Congress raises concerns over proposed changes
The clarification came after senior Congress leader Jairam Ramesh questioned the implications of the proposed amendments.
Ramesh argued that the new legislation could weaken the legal provisions that currently protect users from transaction charges. He also expressed concern that merchants might eventually pass on the additional costs to customers.
The Congress leader warned that such a move could alter the structure of India's digital payment system, which has become popular largely because of its convenience and zero transaction fees for users.
Sitharaman rejects allegations
Responding to the criticism, Sitharaman dismissed the allegations and described them as misleading. She said the concerns could have been discussed in greater detail in Parliament during deliberations on the proposed legislation.
The debate comes at a time when India's digital payment network is expanding rapidly. Although UPI transactions remain free for users, banks and financial technology companies continue to bear significant costs related to transaction processing, fraud detection, cybersecurity and infrastructure development.
For now, the government has made it clear that ordinary users will not be required to pay any MDR charges directly, even if the proposal moves forward in the future.
