Sitharaman: No UPI Charges for End Users, Any MDR Falls on Merchants

Finance Minister Nirmala Sitharaman on Thursday rejected claims that ordinary UPI users could face transaction charges, clarifying that any future Merchant Discount Rate (MDR) will be levied on merchants, not end customers. The clarification, delivered on social media platform X, came in response to a post by Congress leader Jairam Ramesh that accused the government of opening the door to charges on digital payments.

“Merchant Discount Rate (MDR) applies only on the merchants and not on the end users/customers,” Sitharaman wrote. “It will support the Banks & Fintech to invest more on infrastructure, innovation & security. All users of UPI will reap the benefits of this investment.” She described Ramesh’s allegation as a “canard” and added that the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), has not yet taken any decision on MDR.

Sitharaman said the committee’s deliberations will only begin after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, which seeks to amend Section 10A of the Payment and Settlement Systems Act, 2007. The Bill itself does not introduce an MDR or prescribe any fee. Instead, it grants the central government legal authority to modify the existing zero-MDR regime for UPI and RuPay transactions through a future notification. The Lok Sabha passed the Bill on Thursday without debate amid persistent disruptions by opposition parties.

The finance minister criticized the Congress for stalling proceedings in both houses since the Monsoon session began on July 20. “All this could have been discussed on the floor of the House if your party @INCIndia engages constructively in Parliament when the Bill was/is tabled,” she said.

### Payments Council Reaffirms Consumer Protection

The Payments Council of India (PCI), an industry body, issued a separate statement on Friday reiterating that UPI will remain free for consumers and that small merchants, including kirana stores, will not be charged for accepting digital payments. According to the PCI, any merchant service charges (MSC), where applicable, “would be commercial arrangements between merchants and payment service providers and would not translate into consumers paying for UPI transactions.”

The council noted that UPI has been free for consumers since its launch in 2016 and was designed to make digital payments accessible to the smallest businesses. It stressed that banks, fintech companies, NPCI and the Reserve Bank of India (RBI) have collectively invested in technology, cybersecurity and fraud prevention to maintain the platform. The costs of operating the national payments network are currently borne by banks and payment service providers. The PCI added that MSC, where applied to larger merchants, is a standard feature of digital payment ecosystems globally and should not be interpreted as a charge on consumers.

### Opposition and Policy Debate

Jairam Ramesh, in his original post, argued that the proposed amendment eliminates the statutory safeguard that kept UPI transactions fee-free and paves the way for imposing MDR, “which could easily be applied in the future to all types of digital payments.” He said the burden would ultimately fall on ordinary people and that the government’s argument that MDR is necessary for UPI’s financial sustainability is “entirely wrong.”

Ramesh pointed to the RBI’s surplus transfer of Rs 2.86 lakh crore to the government in 2025-26, saying a small portion of that amount could support UPI infrastructure without additional charges on merchants or consumers. He also questioned whether the proposed amendment was influenced by criticism in the U.S. Trade Representative’s 2026 report, which said the fee-free nature of UPI and RuPay disadvantaged global payment companies such as Visa and Mastercard.

Sitharaman rejected these assertions, maintaining that customers would not pay the merchant fee and that the government has made no decision on MDR.

### Industry Context

The debate comes as UPI, which has evolved into the world’s largest real-time payment system processing billions of transactions monthly, faces growing questions about the sustainability of its zero-fee model. According to the PCI, continued investment in infrastructure, security and innovation will be critical to keeping the platform reliable as usage surges.

A separate statement from think tank GTRI, reported by News18, cautioned that India must not rewrite its UPI policies under US pressure and must defend competition and long-term sustainability of its payments ecosystem. GTRI noted that zero MDR has been critical to UPI’s adoption by small shops and roadside vendors.

The finance minister’s clarification provides near-term certainty for fintech stakeholders, with any actual change to the fee structure contingent on legislative passage and a subsequent committee decision.