Sitharaman Rejects UPI Consumer Fee Claims, Says Merchant Charges Won't Reach End Users

Finance Minister Nirmala Sitharaman on Thursday rejected assertions that consumers could face charges for using the Unified Payments Interface, stating that any Merchant Discount Rate (MDR) on digital payments would be levied on merchants, not end-users.

In a post on X, Sitharaman accused Congress leader Jairam Ramesh of “spreading a canard” after he warned that proposed legislative changes would pave the way for fees on ordinary UPI users.

“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.”

The finance minister added that the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), has not yet decided on introducing an MDR. The committee will only consider the matter after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, she said.

The Bill, which was passed by the Lok Sabha on Thursday, amends Section 10A of the Payment and Settlement Systems Act, 2007. It empowers the central government to notify which electronic payment modes or categories of transactions will remain free of charges. According to Sitharaman, the Bill itself does not introduce an MDR or prescribe any fee — it creates a legal framework under which the government may later revise the current zero-MDR regime for UPI and RuPay card transactions.

Sitharaman also linked the lack of parliamentary debate on the Bill to disruptions by opposition parties during the ongoing Monsoon session, which began on July 20. “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 wrote.

**Ramesh’s Challenge**

Jairam Ramesh had earlier argued on X that the proposed amendment “eliminates the statutory guarantee that had so far kept UPI transactions fee-free” and “paves the way for imposing a merchant discount rate, which could easily be applied in the future to all types of digital payments.”

He claimed the burden of any MDR would ultimately fall on ordinary people. Ramesh also disputed the government’s argument that such a charge is necessary for UPI’s financial sustainability, stating that the Reserve Bank of India has sufficient capacity to maintain the system without additional fees. “In 2025-26, the RBI had transferred a surplus of ₹2.86 lakh crore to the Modi government. Just a small portion of this amount would be enough to support this vital digital public infrastructure,” Ramesh wrote, as reported by multiple outlets.

**Industry Reassurance**

Separately, the Payments Council of India (PCI) on Friday reiterated that UPI will remain free for consumers and that small merchants, including kirana stores, will not be charged for accepting digital payments. The industry body said any merchant service charges — where applicable for larger merchants — are commercial arrangements between merchants and payment service providers and “would not mean consumers have to pay for using UPI.”

PCI noted that banks, fintech companies, NPCI, and the Reserve Bank of India have collectively invested for nearly a decade in technology, cybersecurity, fraud prevention, and innovation to maintain UPI’s reliability. It added that continued investment in infrastructure and security will be critical as the platform, now the world’s largest real-time payment system, processes billions of transactions each month.

**Broader Context**

The clarification comes amid growing debate over the sustainability of India’s digital payments ecosystem. The Taxation and Other Laws (Amendment) Bill, 2026, once enacted, will give the government legal authority to modify the existing zero-MDR framework. A steering committee headed by NPCI will then examine whether to introduce merchant fees for certain categories of businesses.

Think tank GTRI on Thursday warned that India must not rewrite its UPI policies under external pressure, and should defend competition and policy autonomy in its payments ecosystem, according to News18.

The fintech and banking sectors, which have been closely watching the legislative developments, received a clear signal from the finance minister that the cost of any future MDR will not be passed on to individual users. The immediate market reaction has been one of relief, with the clarification removing near-term uncertainty over consumer charges for India’s most popular digital payment platform.