Finance Ministry Denies MDR Charges on UPI, Labels Speculation as Baseless
The Finance Ministry on June 11 strongly refuted claims suggesting that Merchant Discount Rate (MDR) charges would be applied to UPI transactions. The ministry labelled such claims as “completely false, baseless, and misleading”.
Government’s Firm Denial
In a post shared on social media platform X, the Ministry of Finance stated: “Speculation and claims that the MDR will be charged on UPI transactions are completely false, baseless, and misleading.
Such baseless and sensation-creating speculations cause needless uncertainty, fear and suspicion among our citizens.” The ministry also emphasized, “The Government remains fully committed to promoting digital payments via UPI.”
Origin of MDR Speculations
The clarification came in response to speculation that the central government was contemplating the reintroduction of MDR on UPI transactions above ₹3,000.
According to a report by ANI, this proposal was reportedly aimed at supporting banks and payment service providers financially.
Further, reports citing unnamed sources suggested that ongoing discussions were considering a model where MDR charges would be based on the transaction value rather than the merchant’s turnover.
These speculations were said to be part of deliberations over sustaining the growing infrastructure and operational requirements of digital transactions.
Payments Council of India’s Representation
The Payments Council of India (PCI), representing over 180 members from the non-banking digital payments sector, had earlier sent a letter to the government in March.
The PCI urged the Centre to reconsider the zero MDR policy applicable to UPI and RuPay debit card transactions.
In its communication, the council highlighted that the digital payments ecosystem is grappling with “pressing financial sustainability concerns” due to the absence of MDR since January 2020.
The PCI acknowledged that although the government had allocated ₹1,500 crore in incentives to compensate operational costs, this was insufficient compared to the estimated ₹10,000 crore needed annually to operate and expand UPI infrastructure.
To address the shortfall, PCI recommended an MDR on RuPay debit card payments for all merchants and a nominal MDR of 0.3 per cent on UPI payments for large-scale merchants.
Surging UPI Volumes and Value
According to official data, UPI transactions reached a new high in January 2025, with over 16.99 billion transactions valued at more than ₹23.48 lakh crore.
These figures represent the highest recorded transaction volume and value in a single month since UPI’s inception.
For the financial year 2023-24, UPI emerged as the backbone of India’s digital payments framework, contributing to 80 per cent of the country’s retail payments.
The total volume of UPI transactions during this period surpassed 131 billion, while the total transaction value crossed ₹200 lakh crore.
Clarification Amid Media Reports
Reiterating its position, the Union Finance Ministry on Wednesday dismissed reports that claimed the government was considering imposing charges on UPI transactions.
These reports had suggested that the imposition of MDR on high-value UPI payments, particularly those above ₹3,000, was under government review as a cost-recovery mechanism for banks and service providers.
Some reports also stated that the PCI had proposed a 0.3 per cent MDR rate specifically for large merchants using UPI.
It was further claimed that stakeholder consultations, including with the National Payments Corporation of India (NPCI), were ongoing and that a decision might be announced in the near future.
However, no official confirmation has been made on these deliberations by the government or regulatory authorities.
Government’s Continued Commitment to UPI
UPI remains pivotal to India’s digital economy strategy, currently accounting for nearly 80 per cent of all retail digital transactions. Since the introduction of the zero-MDR policy in January 2020, the adoption of UPI has grown dramatically.
The total value of person-to-merchant UPI transactions has exceeded ₹60 lakh crore, underlining its growing importance in everyday commerce.
Despite concerns raised by banks and fintech companies over the mounting financial burden of high-frequency, zero-charge transactions, the government has remained steadfast in maintaining a no-cost model to encourage financial inclusion and broader digital adoption.
