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UPI Merchant Fee Draws Opposition Attack, Government Defence
A new rule will charge some shops a small fee when customers pay them through UPI.
The fee is 0.4 per cent for merchant payments above Rs 2,000, starting October 15.
People sending money to other people will not pay this fee.
Merchant payments of Rs 2,000 or less will also stay free.
The government says the shop, not the customer, must pay the fee.
It says the money will help maintain and improve the UPI payment system.
Opposition leaders worry that shops may add the cost to their prices.
They also accuse the government of responding to pressure from the United States.
Government officials reject that accusation and say the fee will not be withdrawn.
A 0.4 per cent Merchant Discount Rate will apply from October 15 to specified merchant UPI payments above Rs 2,000.
Person-to-person transfers and merchant payments up to Rs 2,000 will remain free, while qualifying small merchants are exempt.
The government says customers will not be charged directly and denies foreign pressure influenced the decision.
Opposition leaders allege the fee reflects US pressure and could ultimately raise prices for consumers.
The government says the MDR will support banks and payment providers and make UPI financially sustainable; officials say there will be no rollback.
- Who
- The Indian government, the National Payments Corporation of India, Rahul Gandhi and other Opposition leaders are involved.
- What
- A 0.4 per cent MDR is being introduced for specified person-to-merchant UPI payments above Rs 2,000.
- Where
- India, across the UPI merchant-payment ecosystem.
- When
- The framework is scheduled to take effect on October 15, 2026; the dispute was reported on September 16, 2026.
- Why
- The government says the fee is intended to support payment-system participants and improve UPI’s long-term financial sustainability, while the Opposition alleges US pressure and warns of higher consumer prices.
Opposition parties
Government and BJP
Reason for the MDR
Opposition parties
Rahul Gandhi and other Opposition leaders allege the fee was introduced because of pressure from the United States and to help American card companies compete with UPI.
Government and BJP
The government denies external pressure played a role and says the framework serves the broader interests and sustainability of the UPI ecosystem.
Who ultimately pays
Opposition parties
Opposition leaders argue that merchants may pass the cost to customers through higher prices, even if users are not charged directly.
Government and BJP
The government says the charge is borne fully by merchants and that customers will not pay it; it has advised banks to prevent merchants from passing on the cost.
Need for the fee
Opposition parties
Opposition parties describe the measure as an anti-people decision that weakens a free public digital-payment system.
Government and BJP
The government says maintaining UPI infrastructure can cost up to Rs 20,000 crore annually and that MDR will support banks, payment providers and the system’s long-term expansion.
Key facts
- MDR rate
- 0.4 per cent for specified merchant UPI transactions above Rs 2,000.
- Effective date
- October 15, 2026.
- Transactions remaining free
- Person-to-person transfers and merchant payments up to Rs 2,000.
- Customer liability
- The government says customers will not be directly charged; the merchant bears the MDR.
- Large-transaction cap
- The fee will be capped at Rs 300 for transactions of Rs 75,000 and above.
- Transaction impact
- Payments above Rs 2,000 represented about 4 per cent of person-to-merchant transactions by volume but around two-thirds by value in 2025-26.
- UPI activity
- More than 24,000 crore UPI transactions worth Rs 314 lakh crore were recorded in 2025-26.
- Legal status
- Officials said there would be no rollback, while a plea challenging the framework was filed in the Supreme Court.
Quotes
A government official
An unnamed official commenting on whether the UPI MDR order would be withdrawn
“Customers will not be required to pay any charge when making such payments through UPI.”
freepressjournal.in
“Modi ji, roll back the UPI tax. Now.”
freepressjournal.in
D Raja
General secretary of the Communist Party of India
“Charges on UPI usage, a publicly developed payment technology, are deeply unfortunate and have been brought under US pressure.”
freepressjournal.in
Sources
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