NEW DELHI Addressing growing concerns and political pushback surrounding the revised Merchant Discount Rate (MDR) framework on Unified Payments Interface (UPI) transactions, Union Finance Minister Nirmala Sitharaman clarified that the fee is neither a tax, a cess, nor a surcharge imposed by the central government. In an interaction with PTI, the Finance Minister affirmed that the charge will be borne entirely within the merchant payment ecosystem and will not be passed on to consumers.
Dismissing criticisms from opposition parties and trade bodies as a “misconception,” Sitharaman emphasized that proceeds from the MDR will not enter the Consolidated Fund of India or the government treasury. Instead, the charge is a service fee introduced by the National Payments Corporation of India (NPCI) and operational entities—including acquiring banks, payment gateways, and point-of-sale (POS) providers—to maintain cybersecurity, support digital infrastructure, and create a sustainable financial model for the payment network.
Person-to-person (P2P) transfers and person-to-merchant (P2M) payments up to ₹2,000 remain completely free with no usage limits or hidden fees.
Small traders and street vendors generating monthly UPI collections up to ₹1 lakh via QR codes are entirely exempt from MDR. Over 96% of total UPI transactions will remain unaffected.
A 0.4% MDR applies exclusively to eligible merchant transactions exceeding ₹2,000, capped at ₹300 for payments of ₹75,000 and above. Specialized sectors like railways, fuel, telecom, and insurance will attract a flat ₹5 fee per transaction above ₹2,000.
Drawings parallels to existing credit and debit card systems, the Finance Minister noted that traders routinely absorb card processing MDR without adding it to the end consumer’s bill, and the same standard applies to high-value UPI transactions. To address lingering industry concerns, the Ministry of Finance plans to engage with the Indian Banks Association (IBA) and various trade associations ahead of the framework’s October 15 implementation to ensure the charge remains strictly within the merchant ecosystem.
