Finance Ministry debunks 'external pressure' claims, says decisions for UPI made independently

The Finance Ministry on Wednesday rejected allegations that changes to the Unified Payments Interface (UPI) transaction framework were introduced under foreign pressure, asserting that India takes its digital payments policy decisions independently. The clarification comes amid political criticism of the new merchant discount rate (MDR) framework, under which certain merchant transactions above Rs 2,000 will attract a 0.4 per cent charge. The ministry said the changes were driven by domestic priorities and were intended to create a self-sustaining, inclusive and affordable digital payments ecosystem while ensuring that ordinary consumers continue to use UPI without charges.

Consumers stay protected

The ministry stressed that UPI will remain free for consumers. Person-to-person transfers will carry no charge irrespective of the amount, while customers will also not be required to pay a separate fee for scanning QR codes or making ordinary payments at shops. Under the revised structure, more than 95 per cent of merchant payments fall below the Rs 2,000 threshold and will therefore remain outside the new charge. Small merchants receiving up to Rs 1 lakh a month through UPI QR codes will also continue to be covered by zero-MDR protection.

Merchants bear charge

Larger commercial transactions above Rs 2,000 will attract a 0.4 per cent MDR, which the government said must be borne by merchants rather than customers. Banks have been instructed to ensure that merchants do not pass the cost on to consumers, while UPI applications will not be permitted to impose separate platform charges. The revised framework is scheduled to take effect from October 15.

Essential services capped

The framework provides different treatment for certain essential services. UPI payments exceeding Rs 2,000 for railway bookings, fuel, telecommunications, utility bills and insurance will attract a flat charge capped at Rs 5 per transaction. Mutual fund investments and securities transactions will carry a 0.02 per cent rate, subject to a maximum charge of Rs 300.

Govt cites sustainability

The ministry said UPI’s rapid expansion had created a need for continued investment in infrastructure, cybersecurity and innovation. The network processed 24.5 billion transactions in August 2026 alone, reflecting the enormous scale at which the payment system now operates. The government maintains that revenue generated from higher-value commercial transactions will help strengthen the underlying infrastructure while supporting UPI expansion among small businesses and in Tier-III to Tier-VI towns and rural areas.

Rejecting suggestions that foreign actors influenced the decision, the ministry said the revised framework was intended to balance affordability for consumers and small businesses with the long-term financial sustainability of India’s digital payments infrastructure.