NEW DELHI : Finance Minister Nirmala Sitharaman has clarified that customers will not have to pay if a Merchant Discount Rate (MDR) is introduced on Unified Payments Interface (UPI) transactions in the future.
Her statement came after the Lok Sabha passed the Payment and Settlement Systems (Amendment) Bill, 2026, triggering widespread speculation on social media that UPI payments would soon become chargeable for users.
Responding to the concerns, Sitharaman said any future MDR, if introduced, would be charged only to merchants accepting digital payments and not to customers making transactions through UPI.
She said the fee would help banks and fintech companies invest in payment infrastructure, innovation and cybersecurity, while users would continue to benefit from improved digital payment services.
What has the Lok Sabha approved?
The Bill passed by the Lok Sabha does not introduce charges on UPI payments. Instead, it gives the Central Government the legal authority to allow banks and payment service providers to levy charges on UPI and other notified electronic payment systems in the future.
This means no new charge comes into effect automatically. Any decision to introduce MDR will require the government to issue a separate notification or frame rules.
What is MDR?
Merchant Discount Rate, or MDR, is a fee paid by businesses to banks or payment service providers for processing digital payments.
Customers generally do not pay this fee.Since 2020, the government has maintained a zero-MDR policy on most UPI and RuPay debit card transactions to encourage digital payments across the country.
Why is MDR being discussed again?
Banks and payment companies have argued that operating India’s fast-growing digital payment network involves significant costs, including maintaining payment infrastructure, improving cybersecurity and expanding services.The amendment gives the government the flexibility to permit MDR in the future if it decides such a framework is necessary.
What does this mean for UPI users?
For now, nothing changes. People can continue making UPI payments without paying any transaction fee.
The Finance Minister’s clarification also makes it clear that if MDR is introduced in the future, it would apply only to merchants and not to customers.
