Government Rejects 'Foreign Influence' Claims Over New UPI Merchant Fee

The government has dismissed suggestions that external pressure shaped its decision to introduce a merchant discount rate (MDR) on certain Unified Payments Interface (UPI) transactions, insisting that the policy was framed domestically to keep the digital payments ecosystem viable.

In a post on X, the Finance Ministry said claims of foreign influence were untrue, adding that India's UPI policy choices are taken independently with the aim of building a self-sustaining, inclusive and affordable payments network.

The clarification followed criticism from the Congress, which alleged that the government had yielded to a demand from the United States to impose a fresh charge on some UPI payments from October 15. Congress leader Rahul Gandhi described the move as a "tax" on Indians and accused Prime Minister Narendra Modi of capitulating to US President Donald Trump. The government has not responded directly to that attack.

According to the Finance Ministry, the new pricing framework leaves ordinary users untouched. Person-to-person transfers remain free irrespective of the amount involved, as do payments made to friends, purchases at shops and QR code scans.

The ministry said more than 95 per cent of merchant transactions fall below the Rs 2,000 threshold that triggers the 0.4 per cent fee. Small merchants are protected, with vendors earning up to Rs 1 lakh a month through UPI QR codes continuing to pay nothing.

Only merchant transactions above Rs 2,000 will attract the charge, and it will be borne by merchants rather than customers. For essential services such as train ticket bookings, fuel purchases and telecom payments, a flat fee of Rs 5 per transaction will apply above the Rs 2,000 mark.

The ministry summed up its position by stating that everyday payments remain safe for the country's large base of UPI users.