Sitharaman rejects UPI fee fears, says merchant charges not for consumers

Finance Minister Nirmala Sitharaman on Thursday pushed back against claims that ordinary UPI users could face new charges, saying any Merchant Discount Rate (MDR) would be borne by merchants, not customers — and that no decision on introducing such a fee has been taken.

Responding on X to Congress leader Jairam Ramesh, Sitharaman wrote: “Merchant Discount Rate (MDR) applies only on the merchants and not on the end users/customers. 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 exchange came after Ramesh alleged that the Taxation and Other Laws (Amendment) Bill, 2026, which the Lok Sabha passed earlier Thursday, removes the statutory safeguard keeping UPI transactions fee-free and paves the way for imposing MDR — a cost he argued would ultimately fall on ordinary people.

Ramesh also disputed the government’s contention that MDR is necessary for UPI’s financial sustainability, calling it “entirely wrong.” He noted that the Reserve Bank of India transferred a surplus of ₹2.86 lakh crore to the government in 2025-26, and said a small portion of that could support the digital payments infrastructure without new charges.

Sitharaman dismissed the criticism and clarified that the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), has not yet decided on MDR. “This will happen after the Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026,” she said.

The Bill itself does not introduce any MDR or prescribe fees. It amends Section 10A of the Payment and Settlement Systems Act, 2007, empowering the central government to notify which electronic payment modes or categories of transactions will remain free of charges. Any change to the current zero-MDR regime for UPI and RuPay transactions would come only through a future notification after the bill becomes law.

Sitharaman also criticised the opposition for repeatedly disrupting Parliament during the Monsoon session, which began July 20, saying the bill “could have been discussed on the floor of the House if your party @INCIndia engages constructively in Parliament when the Bill was/is tabled.”

**Fintech and infrastructure investment**

The MDR debate carries direct implications for India’s digital payments ecosystem, where UPI has become the dominant mode for retail transactions. Banks and fintech firms currently process UPI payments under a zero-MDR mandate, limiting their ability to recover costs and invest in expansion.

Sitharaman said the proposed MDR framework would enable banks and fintech companies to “invest more on infrastructure, innovation & security” — a factor she presented as benefiting all UPI users. The statement aligns with the government’s broader push to deepen digital payments adoption while ensuring the ecosystem remains commercially viable for participants.

**External pressures flagged**

Ramesh, according to NDTV Profit, also alleged that the proposed amendment follows criticism in the U.S. Trade Representative’s 2026 report, which questioned the fee-free nature of UPI and RuPay and argued it disadvantaged global payment companies such as Visa and Mastercard. He questioned whether the government was under pressure from Washington to open India’s digital payments ecosystem to American firms — a claim Sitharaman did not directly address.

Separately, think tank GTRI said Thursday that India must not rewrite its UPI policies under U.S. pressure and must defend competition, policy autonomy and the long-term sustainability of its payments ecosystem, as reported by News18. GTRI noted that zero MDR had been critical to growth, allowing consumers, small shops and roadside vendors to transact without charges.

**Next steps**

The Taxation and Other Laws (Amendment) Bill, 2026 now awaits passage in the Rajya Sabha. If enacted, the UPI and Services Steering Committee — chaired by NPCI — will begin deliberations on whether and how to introduce MDR on select transactions. The finance minister has stressed that customers will not be directly charged under any future regime, though merchants could pass on costs, a risk flagged by opposition lawmakers.