Daijiworld Media Network - New Delhi

New Delhi, Aug 8: The government has opened the possibility of introducing a nominal Merchant Discount Rate (MDR) on a limited set of UPI merchant transactions above a specified threshold, while assuring that consumers and person-to-person payments will continue to remain free.

The Ministry of Finance on Saturday clarified that any future MDR on UPI would not be imposed across all merchant transactions and would be substantially lower than the charges applicable to debit and credit card payments.

“As and when MDR charges are introduced, they will apply only to a limited set of merchant transactions, above a certain threshold, at a nominal rate, far lower than debit or credit card MDRs,” the Finance Ministry said in a release.

The ministry said the “vast majority” of UPI transactions would continue to remain free for merchants. Any MDR, if introduced, would be threshold-based and not a blanket levy.

The clarification comes in the wake of the Taxation and Other Laws (Amendment) Bill, 2026, which proposes an amendment to Section 10A of the Payment and Settlement Systems Act, 2007.

Once Parliament passes the Bill, the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), will decide on the applicability of MDR, if any, the ministry said.

The government stressed that the proposed amendment is only an enabling provision and does not mean that charges are being imposed on ordinary UPI users.

“UPI will remain free for citizens,” the ministry said, adding that all person-to-person transactions would also continue to remain free.

Explaining the need for the proposed amendment, the government said the rapid growth in UPI transaction volumes required continuous investment in cybersecurity, fraud prevention and digital payment infrastructure.

It also said a sustainable revenue framework was necessary to encourage more companies to expand their operations in the digital payments ecosystem.

“Reliance on subsidies alone is not viable for the next wave of growth. A balanced framework is required to ensure that UPI remains robust, inclusive, and future-ready,” the ministry said.

The government said the proposed amendment should be viewed as part of its broader efforts to make India’s digital payment infrastructure sustainable and competitive, while ensuring it can support the country’s expanding digital economy.

The ministry also rejected reports that external influences were behind the proposed policy changes, terming such claims “unfounded, completely false and misleading.”