UPI Charges: Finance Ministry Had Called MDR Reports “False” Last Year
Government introduces 0.4 percent MDR on certain merchant payments above ₹2,000 from October 15
New Delhi: The Finance Ministry’s decision to introduce a Merchant Discount Rate on certain UPI transactions has drawn renewed attention to a statement it issued in June 2025, when it rejected reports that the government was planning to impose MDR charges on UPI payments.
On June 11, 2025, the Finance Ministry said on X that reports claiming MDR would be charged on UPI transactions were “completely false, baseless, and misleading”. It also said the government remained committed to promoting digital payments through UPI.
The old statement resurfaced on social media after the government announced a new MDR framework for merchant payments. From October 15, 2026, a 0.4 percent MDR will apply to person to merchant UPI transactions above ₹2,000, subject to a maximum charge of ₹300 per transaction.
The new framework does not impose a direct UPI charge on consumers. Person to person transactions will remain free, while merchant payments of up to ₹2,000 will also remain outside the MDR system. Small merchants receiving up to ₹1 lakh per month through eligible QR based UPI payments will continue to be exempt.
The Finance Ministry has said the MDR is a charge within the merchant payment ecosystem and not a fee that customers will be required to pay when making UPI payments. The government has also stated that individuals will continue to have unlimited free UPI usage without monthly quotas or volume restrictions.
The decision has nevertheless triggered criticism from some opposition politicians and sections of the public. Parliamentary Standing Committee on Finance chairman Bhartruhari Mahtab said MPs had raised the issue during a committee meeting and indicated that it could be discussed at a future meeting.
The new policy marks a shift from the zero MDR system that had been used to encourage the expansion of UPI. The government and payments ecosystem have argued that the new revenue mechanism is intended to support the long term sustainability, infrastructure, cybersecurity and service requirements of the digital payments network.
The contrast between the Finance Ministry’s June 2025 denial of reports about MDR and the current policy has led to renewed debate over the government’s earlier position. However, the 2025 statement was issued in response to reports about a proposed MDR at that time, while the current framework is a new policy announced in September 2026.
The revised MDR framework will come into effect on October 15, 2026.