UPI MDR row: Government rejects ‘external pressure’ claim, says move will support domestic players
The government has rejected allegations that UPI’s new MDR was introduced under US pressure, saying the move is aimed at creating a sustainable revenue model for domestic digital payment players. The clarification comes amid a political row over charges on select UPI merchant transactions above ₹2,000.
- Sep 17, 2026,
- Updated Sep 17, 2026 2:22 PM IST
The Department of Financial Services (DFS) has rejected allegations that the introduction of Merchant Discount Rate (MDR) on select UPI transactions was driven by pressure from the United States, calling the claims “patently false and misleading”.
The government’s clarification came after references were made to the 2026 report of the US Trade Representative (USTR), which raised concerns over the participation of US electronic payment service providers in India’s UPI ecosystem and NPCI’s 30% market-share limit for third-party application providers.
Government links MDR to UPI competition
According to the DFS, the USTR report highlighted the inability of US electronic payment service providers to participate in UPI credit transactions on a level playing field with RuPay. The government said the NPCI circular dated September 15, 2026 permits credit transactions on UPI only through RuPay credit cards.
The DFS said the policy is intended to promote RuPay as a domestic alternative in India’s credit-card ecosystem.
On the 30% market-share limit for third-party application providers, the government said NPCI had mandated the cap in November 2020, but its implementation had been difficult because smaller companies lacked a self-sustaining revenue model to compete with established players.
The government argued that introducing MDR on select high-value transactions would provide smaller UPI companies with a potential revenue stream and allow them to expand their presence.
“Introduction of MDR on select high-value transactions will enable more domestic companies to operate under UPI,” the DFS said, adding that the move was aimed at strengthening India’s domestic electronic payments ecosystem.
MUST READ: UPI MDR vs cards: Is UPI still cheaper for merchants despite the new charges on ₹2,000+ payments?
Rahul Gandhi's stand on UPI MDR
Congress leader and Leader of Opposition in the Lok Sabha Rahul Gandhi has opposed the new UPI charges and demanded their withdrawal.
On Wednesday, Gandhi posted a video on X alleging that PM Narendra Modi had introduced the charge under pressure from the US, a claim rejected by the Finance Ministry.
The government, however, has questioned the rationale behind the criticism, pointing to recommendations of the Parliamentary Standing Committee on Finance.
According to the government, the committee had recommended a tiered MDR or revenue framework for UPI and called for it to be notified and operationalised without delay.
ALSO READ: MDR on UPI: Will examine concerns raised by stockbrokers, says SEBI chief
Political row
The issue has triggered a dispute over what the parliamentary panel actually discussed.
Five Congress members of the Finance Committee, including former ministers P Chidambaram and Manish Tewari, were present when the panel adopted its report in August. Government sources said the members did not record dissent against the recommendation for a tiered MDR framework.
Congress MPs, however, have disputed the government's interpretation.
Congress MP Gaurav Gogoi said the Finance Department had not presented any specific proposal on the recently announced UPI charges when the committee met. He said questions were raised about MDR but government representatives did not provide “specific or satisfactory answers”.
Manish Tewari also supported Gogoi’s assertion that no specific proposal on the latest MDR was placed before the committee.
Since the announcement on September 14, the government stated that the MDR framework is aimed at creating a sustainable revenue model for UPI players and strengthening competition within the domestic digital payments ecosystem.
With the new charges set to apply to select high-value merchant transactions, the debate is now focused on their impact on merchants, UPI platforms and the broader digital payments ecosystem, as well as the government's stated objective of creating a more sustainable revenue model for UPI.
The Department of Financial Services (DFS) has rejected allegations that the introduction of Merchant Discount Rate (MDR) on select UPI transactions was driven by pressure from the United States, calling the claims “patently false and misleading”.
The government’s clarification came after references were made to the 2026 report of the US Trade Representative (USTR), which raised concerns over the participation of US electronic payment service providers in India’s UPI ecosystem and NPCI’s 30% market-share limit for third-party application providers.
Government links MDR to UPI competition
According to the DFS, the USTR report highlighted the inability of US electronic payment service providers to participate in UPI credit transactions on a level playing field with RuPay. The government said the NPCI circular dated September 15, 2026 permits credit transactions on UPI only through RuPay credit cards.
The DFS said the policy is intended to promote RuPay as a domestic alternative in India’s credit-card ecosystem.
On the 30% market-share limit for third-party application providers, the government said NPCI had mandated the cap in November 2020, but its implementation had been difficult because smaller companies lacked a self-sustaining revenue model to compete with established players.
The government argued that introducing MDR on select high-value transactions would provide smaller UPI companies with a potential revenue stream and allow them to expand their presence.
“Introduction of MDR on select high-value transactions will enable more domestic companies to operate under UPI,” the DFS said, adding that the move was aimed at strengthening India’s domestic electronic payments ecosystem.
MUST READ: UPI MDR vs cards: Is UPI still cheaper for merchants despite the new charges on ₹2,000+ payments?
Rahul Gandhi's stand on UPI MDR
Congress leader and Leader of Opposition in the Lok Sabha Rahul Gandhi has opposed the new UPI charges and demanded their withdrawal.
On Wednesday, Gandhi posted a video on X alleging that PM Narendra Modi had introduced the charge under pressure from the US, a claim rejected by the Finance Ministry.
The government, however, has questioned the rationale behind the criticism, pointing to recommendations of the Parliamentary Standing Committee on Finance.
According to the government, the committee had recommended a tiered MDR or revenue framework for UPI and called for it to be notified and operationalised without delay.
ALSO READ: MDR on UPI: Will examine concerns raised by stockbrokers, says SEBI chief
Political row
The issue has triggered a dispute over what the parliamentary panel actually discussed.
Five Congress members of the Finance Committee, including former ministers P Chidambaram and Manish Tewari, were present when the panel adopted its report in August. Government sources said the members did not record dissent against the recommendation for a tiered MDR framework.
Congress MPs, however, have disputed the government's interpretation.
Congress MP Gaurav Gogoi said the Finance Department had not presented any specific proposal on the recently announced UPI charges when the committee met. He said questions were raised about MDR but government representatives did not provide “specific or satisfactory answers”.
Manish Tewari also supported Gogoi’s assertion that no specific proposal on the latest MDR was placed before the committee.
Since the announcement on September 14, the government stated that the MDR framework is aimed at creating a sustainable revenue model for UPI players and strengthening competition within the domestic digital payments ecosystem.
With the new charges set to apply to select high-value merchant transactions, the debate is now focused on their impact on merchants, UPI platforms and the broader digital payments ecosystem, as well as the government's stated objective of creating a more sustainable revenue model for UPI.