'MDR applies only to merchants, not end users': FM Sitharaman hits back at Jairam Ramesh on UPI charge

Finance Minister Nirmala Sitharaman on Thursday slammed Congress leader Jairam Ramesh over his claim that the government was paving the way to impose charges on all UPI transactions.

She said the Congress leader was spreading a "canard" and clarified that any Merchant Discount Rate (MDR), if introduced, would apply only to merchants and not to customers.

"Before spreading a canard, @Jairam_Ramesh ji, please consider this," the FM said. "Merchant Discount Rate (MDR) applies only on the merchants and not on the end users/customers. It will support the Banks & Fintech to invest more on infrastructure, innovation & security. All users of UPI will reap the benefits of this investment."

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More importantly, the minister added, 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."

Taking a swipe at the Congress, Sitharaman added, "All this could have been discussed on the floor of the House if your party @INCIndia engages constructively in Parliament when the Bill was/is tabled. (LS/RS respectively)."

WHAT JAIRAM RAMESH ALLEGED

Ramesh had earlier claimed that the proposed amendment removes the statutory guarantee that kept UPI transactions free and opens the door for imposing MDR on digital payments.

He argued that the burden would eventually fall on ordinary users and questioned the government's claim that MDR was necessary to keep UPI financially sustainable.

The Congress leader also said the RBI had enough financial capacity to support the UPI ecosystem, pointing to its ₹2.86 lakh crore surplus transfer to the government in 2025-26.

He further alleged that the amendment may have been prompted by the U.S. Trade Representative's criticism of India's zero-fee UPI and RuPay ecosystem, and questioned whether the government was acting under pressure from US President Donald Trump.

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WHAT THE GOVERNMENT HAS SAID

Government sources had earlier told Business Today that the proposal is not intended to affect individual users or small merchants.

According to the sources, discussions have focused on levying MDR only on large merchants, including major e-commerce companies and businesses above a prescribed annual turnover threshold. Small-value transactions and person-to-person UPI payments are expected to remain outside the proposed framework.

The sources said discussions on bringing back MDR have been underway for nearly two years. The proposed amendment only restores the government's legal power to levy MDR by removing the statutory prohibition. The final rate, turnover threshold and implementation framework will be decided later after consultations with industry stakeholders.

Merchant Discount Rate is the fee merchants pay to banks, payment providers and other intermediaries for processing digital payment transactions.