Union Finance Minister Nirmala Sitharaman has defended the newly introduced Merchant Discount Rate (MDR) on UPI transactions, clarifying that the charge will apply only between payment operators and will not be passed on to consumers. Addressing speculation around the fee, she accused the opposition of spreading confusion and urged the public to stay cautious about misinformation.
Sitharaman said she had already clarified the matter in Parliament, emphasizing that MDR is strictly a charge levied between payment service providers and does not fall on UPI users. She reiterated that it is neither a tax nor a cess, and that the funds collected will not go into the Consolidated Fund of India.
She explained that the charge doesn’t apply to transactions under Rs 2,000, and is meant to help service providers improve infrastructure and service quality rather than target small transactions. She stressed that since it’s a charge between operators, the cost will not be shifted onto customers.
Sitharaman noted she had offered the same clarification during the parliamentary session when the issue first arose, and accused the opposition of habitually spreading misconceptions to attack the government, calling on the public to remain vigilant against misinformation.
NITI Aayog weighs in
Separately, NITI Aayog Vice Chairman Ashok Kumar Lahiri also voiced support for introducing MDR on high-value UPI transactions, arguing that businesses need to find sustainable models rather than depending on government subsidies. Invoking the ancient philosopher Chanakya, Lahiri compared responsible taxation to a bee collecting honey from a flower, gently and gradually, without causing harm. He said businesses need to find ways to sustain themselves without relying on subsidies, though he clarified that this reflected his personal view rather than NITI Aayog’s official stance.
The government has firmly ruled out reconsidering the decision, with a senior official telling PTI there was no question of a rethink.
Background on the new framework
Sitharaman’s remarks follow the National Payments Corporation of India’s (NPCI) rollout of a new MDR framework on September 15. Under the new rules, a 0.4% MDR will apply to Person-to-Merchant (P2M) UPI transactions exceeding Rs 2,000, capped at Rs 300 per transaction.
Consumers will continue to use UPI free of charge. The government has said around 96% of P2M transactions will remain unaffected by the change, with the collected MDR to be shared among ecosystem participants such as banks and payment app providers.
