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Government moves to shield consumers from new UPI fee (Img: Dynamite News)
New Delhi: The central government is iin talks with payment aggregators and other stakeholders in the Unified Payments Interface (UPI) ecosystem to ensure that merchants do not pass the newly introduced Merchant Discount Rate (MDR) on to customers, sources said.
As per reports, the Finance Ministry is also working to set up a monitoring mechanism to track whether merchants attempt to recover the fee from consumers, particularly on high-value UPI transactions. The move comes amid concerns that the new charge could increase costs for people using UPI for larger payments.
Under the new rules, a 0.4 per cent MDR will be imposed from October 15 on person-to-merchant UPI transactions above Rs 2,000. The fee is to be paid by merchants rather than customers, with the charge capped at Rs 300 for transactions of Rs 75,000 or more.
Sources said the ministry has begun engaging payment aggregators and other participants to make them aware of the new framework and ensure that consumers are not made to bear the additional cost.
Concerns have emerged that some merchants could try to recover the MDR by raising prices or adding a separate fee for UPI payments.
The government does not expect the measure to significantly affect UPI adoption. Sources said transactions covered by the new MDR are expected to account for only around 4 per cent of total UPI transaction volume.
They also said the change is unlikely to drive consumers towards cash, noting that RuPay debit card transactions will remain free irrespective of the transaction amount. The limited share of affected transactions is also expected to prevent any significant inflationary impact.
The development comes after the Finance Ministry rejected allegations that the MDR was introduced because of pressure from the United States.
The Department of Financial Services said the September 15 NPCI circular does not provide international credit cards with an advantage over RuPay. Under the existing framework, only RuPay credit cards can be used for credit transactions through UPI.
“The allegation that MDR has been introduced under any external influence is patently false and misleading," the DFS said in a post on X.
The clarification followed concerns raised in the US Trade Representative’s 2026 report about US electronic payment providers not being able to participate in UPI credit transactions on an equal footing with RuPay.
The MDR is intended to establish a sustainable revenue framework for the digital payments ecosystem, while person-to-person payments and most routine merchant transactions will continue to remain free.
