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The Finance Ministry on Wednesday rejected reports suggesting that a fee would be imposed on Unified Payments Interface (UPI) transactions, calling them “completely false, baseless, and misleading”.
“Speculation and claims that the merchant discount rate (MDR) will be charged on UPI transactions are completely false, baseless, and misleading,” the ministry stated in a post on social media platform X. “Such baseless and sensation-creating speculations cause needless uncertainty, fear and suspicion among our citizens. The Government remains fully committed to promoting digital payments via UPI.”
Understanding MDR and current policy
MDR is a fee paid by merchants to banks for processing real-time digital transactions. Currently, UPI and RuPay debit card payments attract no MDR, a policy implemented through the National Payments Corporation of India (NPCI).
This zero-MDR regime has been in effect since it was announced in the FY22 Budget to boost digital adoption. Previously, merchants paid a fee of under 1 per cent of the transaction amount. With UPI becoming the dominant retail payments method and RuPay gaining traction, many experts argue that a complete waiver on MDR may no longer be sustainable.
Industry appeals for MDR reinstatement
Several industry stakeholders have questioned the long-term viability of the zero-MDR model, highlighting the cost burden on banks and payment service providers. Earlier this year, the Payments Council of India — representing digital payment service providers — wrote to Prime Minister Narendra Modi, requesting the reintroduction of MDR.
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The council recommended a 0.3 per cent MDR on UPI payments made to large merchants and proposed a nominal, fixed MDR on all RuPay debit card transactions.
Government maintains support through incentives
To promote continued adoption, the Union Cabinet recently extended a ₹1,500 crore incentive scheme designed to compensate stakeholders for the cost of small-value UPI transactions. However, fintech firms have criticised the amount, arguing it is insufficient to support the surging volume of digital payments.
UPI continues to show strong growth
According to the Reserve Bank of India’s (RBI) annual report for FY25, digital payments have surged nationwide. UPI accounted for 185.8 billion transactions during the year — a 41.7 per cent increase from 131.1 billion in FY24.
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