7 hrs ago
India Rejects US Pressure Claims Over New UPI MDR
India is adding a small fee to some large payments made to businesses through UPI.
The rule starts on October 15, 2026.
Businesses, not customers, are supposed to pay the fee.
The government says the money will help smaller Indian payment companies compete.
It denies that the United States pressured India to make this change.
A US report had criticized India’s payment rules as less favorable to foreign companies.
India says only RuPay credit cards can be used for credit payments on UPI.
Most everyday payments and payments between people will still be free.
The government also says it will monitor merchants so they do not pass the fee to customers.
The Finance Ministry denied that US pressure influenced the new UPI MDR policy.
From October 15, 2026, a 0.4% MDR will apply to specified merchant payments above ₹2,000.
Merchants, rather than consumers, will pay the charge, capped at ₹300 for transactions of ₹75,000 or more.
The government and NPCI said MDR will give smaller domestic UPI companies a sustainable revenue model and strengthen competition.
Only RuPay credit cards can currently support UPI credit transactions; most payments, including person-to-person transfers, will remain free.
- Who
- India’s Finance Ministry and Department of Financial Services, NPCI, domestic UPI companies, Opposition leaders, BharatPe, and the United States Trade Representative.
- What
- The government explained the introduction of MDR on selected high-value UPI merchant payments and rejected allegations that US pressure caused the decision.
- Where
- India’s Unified Payments Interface and digital-payments ecosystem.
- When
- The clarification was issued on September 17, 2026; the MDR is scheduled to begin on October 15, 2026.
- Why
- The government and NPCI said MDR would create sustainable revenue for smaller domestic companies, increase competition, and support India’s electronic-payment sovereignty.
Government and NPCI’s rationale
Opposition and foreign-provider concerns
Reason for introducing MDR
Government and NPCI’s rationale
The Finance Ministry and NPCI said MDR will create a self-sustaining revenue model for smaller domestic UPI companies, helping them expand and compete with market leaders.
Opposition and foreign-provider concerns
Opposition leaders alleged that the measure followed US pressure and criticized it as a tax or regressive charge on digital payments.
Effect on consumers and merchants
Government and NPCI’s rationale
The government said consumers will not pay the MDR, person-to-person transfers will remain free, and exemptions cover most everyday merchant transactions. It is also preparing monitoring mechanisms to prevent merchants passing the charge to customers.
Opposition and foreign-provider concerns
Critics, including Ashneer Grover, warned that any UPI MDR could damage mobile payments, while Opposition leaders argued that the charge could burden users and traders.
Access for international payment companies
Government and NPCI’s rationale
The Finance Ministry said allowing only RuPay credit cards on UPI is an intentional policy supporting a domestic alternative and India’s electronic-payment sovereignty.
Opposition and foreign-provider concerns
The USTR report said India’s policies appeared to favor domestic payment providers, citing limited access for US companies and the 30% cap on third-party UPI applications.
Key facts
- MDR rate
- A 0.4% charge applies to specified person-to-merchant UPI payments above ₹2,000; one article described the rate as 0.04%.
- Effective date
- The new MDR is scheduled to take effect on October 15, 2026.
- Maximum charge
- The MDR is capped at ₹300 for transactions of ₹75,000 or more.
- Who pays
- Merchants are responsible for the MDR, while consumers are not intended to bear it.
- Small-merchant exemption
- Merchants collecting up to ₹1 lakh monthly through UPI QR codes remain exempt; officials said this covers about 96% of merchant transactions.
- Special transaction fees
- Railways, telecom, fuel, and insurance payments above ₹2,000 face a flat ₹5 fee, while capital-market payments face a 0.02% MDR capped at ₹300.
- RuPay policy
- The September 15 NPCI circular allows UPI credit transactions only through RuPay credit cards; RuPay debit transactions remain free of MDR.
- Market-share policy
- The USTR report cited NPCI’s 30% ceiling for third-party UPI application providers, scheduled for enforcement in December 2026.
Quotes
National Payments Corporation of India
India’s operator of the UPI payments infrastructure
“The NPCI circular of September 15, 2026, does not allow credit transactions on UPI by any other credit card other than the RuPay credit card. There is a clear policy of only allowing RuPay credit card on UPI to enable RuPay credit card to become the preferred choice of credit card amongst users in India.”
telegraphindia.com
rediff.com
livemint.com
“Introduction of MDR on select high-value transactions will provide a self-sustaining revenue model to smaller companies to compete for a higher share in the UPI ecosystem”
news18.com
livemint.com
Ashneer Grover
BharatPe's former co-founder and CEO criticizing the UPI MDR change
“Any MDR on UPI will kill the one thing in India which is working like clockwork, i.e., mobile payments. It's a regressive step the government should reconsider.”
telegraphindia.com
Sources
UPI row: Govt rejects claims of US pressure, cites NPCI circular, RuPay advantage; BharatPe backs move
Why Was UPI MDR Introduced? Finance Ministry Explains Govt's Logic, Dismisses 'US Pressure' Claim
India Rejects US Influence Claims Over UPI MDR Policy
UPI MDR decision: FinMin rejects claims of US influence, says NPCI rules aim to support domestic competition
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