3 weeks ago
Lok Sabha Passes Bill Enabling Future UPI MDR, Sitharaman Clarifies
India has a digital payment system called UPI that lets people send and receive money using their phones, and it is very popular.
Right now, using UPI is completely free for everyone.
A group of lawmakers called the Lok Sabha passed a new law that could change this in the future.
The law does not add any new fees right now, but it gives the government permission to decide later whether shops should pay a small fee called MDR for accepting UPI payments.
The Finance Minister, Nirmala Sitharaman, says this fee would only be paid by merchants, not by customers.
She says the money could help banks build better and safer payment systems.
Businessman Ashneer Grover disagrees and says adding any fee would be a big mistake that could hurt mobile payments.
Some experts also worry shops might pass the cost on to customers or stop accepting UPI.
For now, nothing has changed, and UPI payments remain free.
The government will decide about the fee only later, after getting advice from the NPCI-led steering committee.
The Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026, amending the Payment and Settlement Systems Act, 2007.
The Bill itself does not introduce MDR or prescribe fees for UPI or RuPay transactions; it only empowers future changes to the zero-MDR regime.
Finance Minister Nirmala Sitharaman said MDR, if introduced, would apply only to merchants and support investment in infrastructure, innovation and security.
Ashneer Grover called any MDR on UPI a 'regressive step' that would kill India's mobile payments.
The GTRI think tank urged India not to rewrite its UPI framework under pressure from the United States.
- Who
- Ashneer Grover, Finance Minister Nirmala Sitharaman, the Lok Sabha, the National Payments Corporation of India (NPCI), and the Global Trade Research Initiative (GTRI).
- What
- The Lok Sabha passed the Taxation and Other Laws (Amendment) Bill, 2026, creating a legal framework that could allow the government to impose Merchant Discount Rate (MDR) on UPI transactions in the future, sparking a debate.
- Where
- India
- When
- August 2026 — the Bill was passed and reactions followed on August 6-7, 2026.
- Why
- To give the government legal authority to revise the zero-MDR regime, potentially funding payment infrastructure, while critics say it could hurt the adoption of mobile payments.
Critics of UPI MDR
Supporters of UPI MDR
Imposing MDR on UPI
Critics of UPI MDR
Ashneer Grover says any MDR on UPI will kill India's mobile payments and calls the move a regressive step the government should reconsider.
Supporters of UPI MDR
Finance Minister Nirmala Sitharaman says MDR applies only to merchants, not customers, and would help banks and fintech firms invest in infrastructure, innovation and security.
Effect on small merchants and consumers
Critics of UPI MDR
Critics fear costs on merchants could discourage small businesses from accepting UPI or lead them to pass the cost on to consumers over time.
Supporters of UPI MDR
Supporters argue MDR revenue would let banks and fintech firms invest in payment infrastructure, cybersecurity and innovation as UPI transaction volumes grow.
UPI policy and external pressure
Critics of UPI MDR
GTRI says India should not rewrite its UPI policies under pressure from the United States and must safeguard competition, policy autonomy and long-term sustainability of the digital payments ecosystem.
Supporters of UPI MDR
The government stresses no decision on MDR has been taken and the Bill merely creates a legal framework, leaving the current zero-charge regime unchanged.
Key facts
- Key legislation
- Taxation and Other Laws (Amendment) Bill, 2026
- Law amended
- Payment and Settlement Systems Act, 2007 (Section 10A)
- Covered payment systems
- UPI and RuPay
- Current UPI regime
- Zero-charge for users and no MDR; remains unchanged
- MDR applies to
- Merchants only, not end users (per Finance Minister)
- MDR decision status
- Not yet taken; pending NPCI-led UPI and Services Steering Committee
- Main proponent of MDR framework
- Nirmala Sitharaman (Finance Minister)
- Leading critic
- Ashneer Grover
- GTRI position
- Resist external (US) pressure to alter UPI framework
Quotes
Nirmala Sitharaman
Finance Minister of India
“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.”
businesstoday.in
“Any MDR on UPI - will kill the one thing in India which is working like clock work i.e. mobile payments. It’s a regressive step - government should reconsider.”
businesstoday.in
Sources
Related news
Sitharaman clarifies UPI charges apply to merchants, not customers
FM Sitharaman rejects UPI charge claims, accuses Ramesh of canard
UPI Payments Remain Free as New Bill Explains MDR
Lok Sabha passes bill allowing UPI merchant discount rate charges
UPI Remains Free for Users, Nominal Merchant Fee Possible: Govt
UPI Accepted in 11 Countries, But Payments Vary
Axis Bank Adds Separate UPI Limits for Payment Categories
Credit Card Transactions Surge as Average Spending Falls in July
India Plans Agentic AI Payments Through Popular UPI Network
India’s Banking Summit Maps AI’s Responsible Financial Frontier
