New Delhi, September 16, 2026 (Yes Punjab News)
The Finance Ministry has rejected claims that changes to the Merchant Discount Rate (MDR) framework for Unified Payments Interface (UPI) transactions have been driven by foreign influence, asserting that India’s digital payments policy is formulated independently.
In a post on social media, the ministry said UPI, launched in 2016, has developed into the world’s largest real-time interoperable payment system and that its policy decisions are aimed at building a sustainable, inclusive and affordable digital payments ecosystem.
The government said the new framework is intended to support the long-term sustainability and expansion of UPI, including investments in payment infrastructure, cybersecurity and wider adoption in rural and semi-urban areas. UPI processed 24.5 billion transactions in August 2026, according to the ministry.
The Finance Ministry stressed that UPI will remain free for consumers. All person-to-person transactions will continue to be free, irrespective of the amount, while payments to merchants up to Rs 2,000 and transactions covered under the zero-MDR framework for small merchants will also remain free. Together, around 96 per cent of P2M transactions are expected to remain unaffected.
Under the framework, a 0.4 per cent MDR will apply to specified merchant transactions above Rs 2,000, with the charge capped at Rs 300 for transactions of Rs 75,000 and above. Small merchants receiving up to Rs 1 lakh per month through UPI QR codes under the P2PM category will continue to enjoy zero MDR.
Transactions above Rs 2,000 in essential sectors such as railways, telecommunications, insurance, fuel and agricultural inputs will attract a flat MDR of Rs 5, while mutual funds, securities and related capital-market payments will carry an MDR of 0.02 per cent, capped at Rs 300.
The ministry clarified that MDR is neither a tax nor a charge collected by the government or NPCI. It is distributed among participants in the payment ecosystem, including banks and payment service providers.
It also said banks have been advised to ensure that merchants do not pass MDR costs on to customers, while UPI application providers have been prohibited from imposing platform fees or hidden charges.
The government has maintained that the framework is aimed at strengthening UPI’s infrastructure and resilience while protecting consumers and small merchants from additional payment costs.
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