Centre Discusses UPI Charges With Payment Firms, Aims To Shield Customers: Sources

The Centre has initiated talks with payment aggregators and other participants in the Unified Payments Interface (UPI) ecosystem to ensure that the newly introduced Merchant Discount Rate (MDR) is not passed on to consumers, sources said on Thursday.

The Finance Ministry is also working on a mechanism to monitor transactions and prevent merchants from recovering the fee from customers. The move follows concerns that the new charge could increase the cost of high-value UPI payments.

From October 15, a 0.4 per cent MDR will apply to person-to-merchant UPI transactions above Rs 2,000. The fee will be payable by merchants, not customers, and will be capped at Rs 300 for transactions of Rs 75,000 or more.

Centre Engages UPI Stakeholders

According to sources, the Finance Ministry has begun discussions with payment aggregators and other stakeholders to create awareness about the new MDR and ensure that consumers are not charged separately for making UPI payments.

The government is also examining the possibility of merchants recovering the fee indirectly by increasing prices or adding an extra charge to UPI transactions.

Despite the introduction of the MDR, officials do not expect a major effect on overall UPI usage. Sources estimate that transactions covered by the new fee will account for only around 4 per cent of the total volume of UPI transactions.

The sources said the move is also unlikely to trigger a significant shift towards cash. RuPay debit card transactions will continue to be free, irrespective of the transaction amount.

The government does not expect the MDR to create a notable inflationary impact either, as only a relatively small portion of UPI transactions will fall within the scope of the new charge.

Government Rejects US Influence Claims

The Finance Ministry’s move comes amid a separate controversy over claims that the MDR was introduced because of pressure from the United States.

The Department of Financial Services rejected the allegation, saying the September 15 NPCI circular does not provide international credit cards with any preferential treatment over RuPay.

Under the existing UPI framework, credit card transactions on the platform can currently be carried out only through RuPay credit cards.

“The allegation that MDR has been introduced under any external influence is patently false and misleading,” the DFS said in a post on X.

The clarification followed concerns mentioned in the US Trade Representative’s 2026 report regarding the inability of US electronic payment providers to participate in UPI credit transactions on an equal footing with RuPay.

The MDR has been introduced as part of efforts to establish a sustainable revenue model for India’s digital payments ecosystem. Person-to-person transfers and most routine merchant UPI transactions will continue to remain free under the revised system.