Union Finance Minister Nirmala Sitharaman has clarified the confusion over possible Merchant Discount Rate (MDR) charges on UPI payments.
She said that any MDR introduced on UPI transactions would apply to merchants, not ordinary customers.
The clarification came after Congress leader Jairam Ramesh raised concerns that UPI users could end up paying more for digital transactions.
Final Decision on UPI MDR Still Pending
The Finance Minister said that no final decision has been taken on MDR yet. The UPI and NPCI-led Services Steering Committee is still considering the matter.
A decision is expected only after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026.
The proposed law would give the government the power to decide which electronic payment methods or transactions should remain free.
How MDR Could Help UPI Users
According to Sitharaman, MDR would be charged to merchants rather than customers. The money collected could help banks and fintech companies invest more in payment infrastructure, innovation and security.
She said these investments could ultimately improve the UPI experience for ordinary users by making digital payments safer and more reliable.
What Could Change Under the New Bill?
The Finance Minister introduced the Taxation and Other Laws (Amendment) Bill, 2026, in Parliament on Tuesday.
The bill proposes removing the existing restriction that prevents banks and payment service providers from charging MDR on certain notified electronic payment methods.
Following the introduction of the bill, there has been speculation that MDR of around 0.25% to 0.40% could be allowed on UPI payments above ₹2,000. However, no final rate or rule has been announced yet.
Small Everyday UPI Payments May Remain Unaffected
According to government estimates, UPI transactions above ₹2,000 account for only around 5% of the total number of transactions, although they represent about 65% of the total transaction value.
This means everyday UPI payments for milk, vegetables, groceries, auto rides and taxi fares are unlikely to be affected.
UPI continues to handle a massive number of digital payments in India. In July, around 23.7 billion UPI transactions were recorded, with their total value reaching approximately ₹29.9 trillion.
