India: Finance Minister Rejects Claims of UPI Transaction Charges

Finance Minister Nirmala Sitharaman on Thursday rejected the Congress’s charge that the Taxation and Other Laws (Amendment) Bill paves the way for charges on UPI transactions. She said that the Merchant Discount Rate (MDR) applies only to merchants and not to end users. Responding on X to Congress general secretary Jairam Ramesh, the Finance Minister said the MDR would help banks and fintech firms invest more in infrastructure, innovation and security and that all UPI users would benefit from that investment. “Before spreading a canard, Jairam Ramesh ji, please consider this: 1. Merchant Discount Rate (MDR) applies only on the merchants and not on the end users/customers,” she posted on X. Sitharaman said no decision on the rate has been taken so far. “More importantly, the UPI and Services Steering Committee headed by NPCI is yet to decide on the MDR. This will happen after the Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, which proposes to amend Section 10A of the Payment and Settlement Systems Act, 2007,” she said. Her remarks came after Ramesh said the bill removes the statutory guarantee that keeps UPI transactions free and opens the door to MDR charges, which he said can easily be expanded to all payments in the future. The cost will inevitably be borne by ordinary people, who will now have to pay to use UPI transactions, he said. “The Modi Government’s claim that this is the only route to keep UPI financially sustainable is a lie. The RBI has the financial capacity to sustainably fund the UPI ecosystem without imposing charges on merchants or consumers,” Ramesh said. The RBI transferred Rs 2.86 lakh crore to the government in 2025-26, he said, adding that it would take only a small fraction of this surplus transfer to support the critical digital public infrastructure. “Indeed, the real reason why this amendment is being introduced is perhaps more concerning. It follows the US Trade Representative’s 2026 report which criticizes UPI and RuPay for being free and accuses them of having driven out American payment platforms like Visa and MasterCard,” the Congress leader’s X post read. “Is the Prime Minister seeking to dilute UPI and open the digital payments sector to American businesses under pressure from his good friend (US President) Donald Trump,” he asked. “We also know that the Modi Government capitulated to President Trump’s bullying and accepted a grossly unfair Indo-US trade deal which sacrifices the interests of our farmers and small businesses in particular,” he said. The Lok Sabha passed the bill earlier in the day without a debate amid persistent sloganeering by the Opposition over various issues. The House was adjourned for the day after the bill was passed. Through the bill, the government seeks to attract more foreign capital, promote domestic electronics manufacturing and make it easier for foreign cloud companies to use Indian data centres by providing “process certainty”. The bill also removes the linkage between the Payment and Settlement Systems Act and the Income Tax Act, and gives legal backing to the government to modify the zero-MDR framework on UPI and RuPay card transactions. At present, banks and payment-system providers cannot directly or indirectly charge users for payments made through UPI and RuPay debit cards. The bill proposes to allow the Central government to decide, through notification, which electronic payment modes or transactions must remain free.