Finance Ministry dismisses speculation of MDR charges on UPI transactions as ‘false, baseless, and misleading’

The Finance Ministry on June 11 dismissed claims that Merchant Discount Rate (MDR) charges will be applied on UPI transactions calling speculations as “completely false, baseless, and misleading”.

In a post on X, the ministry wrote: “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 Government remains fully committed to promoting digital payments via UPI,” it added.

MDR on UPI? Why the speculation?

The clarification follows speulation that the central government was mulling re-introducing MDR on UPI transactions above ₹3,000 in order to support banks and payment service providers, according to an ANI report.

Further, reports citing sources also speculated that discussions were underway over allowing MDR based on transaction value rather than merchant turnover, it added.

Industry push for MDR: Why?

The Payments Council of India (PCI) had in March submitted a letter to the Centre seeking “urgent reconsideration of the zero MDR policy for Unified Payments Interface and RuPay debit card transactions”, as per the report.

PCI is an 180-member industry body that represents various non-banking payment industry players. In its letter, it said the digital payments ecosystem is facing “pressing financial sustainability concerns” due to the zero MDR policy, which has been in effect since January 2020. 

The letter noted that while the government has allocated ₹1,5000 crore of financial incentives to offset some of the operational costs, this covers only a fraction of the estimated ₹10,000 crore annual cost required to maintain and expand UPI services.

To address the challenge, the industry proposed the introduction of an MDR for RuPay debit cards for all merchants and a reasonable MDR of 0.3 per cent for UPI only for large merchants.

UPI transactions data

As per the official data, for the first time, UPI transactions in the month of January 2025 surpassed 16.99 billion and the value exceeded ₹23.48 lakh crore, marking the highest number recorded in any month.

The government data shows that for FY 2023-24, the UPI remains the cornerstone of India's digital payment ecosystem, contributing to 80 per cent of the retail payments across the country. The total transaction volume exceeded 131 billion and the value exceeded ₹200 lakh crore for FY 2023-24.

(With inputs from ANI)