Confusion over possible Merchant Discount Rate (MDR) charges on UPI payments above ₹2,000 has intensified after recent legislative changes. However, Finance Minister Nirmala Sitharaman has clarified that the proposed MDR framework, if implemented, will not impose charges on individual UPI users.

The minister stated that any future MDR on eligible UPI transactions would apply to merchants, not customers making payments through UPI. Her clarification came amid political debate and public concern over whether digital payments would become chargeable for ordinary users. (

Finance Minister Clears the Confusion

The discussion began after Parliament passed amendments to the Payment and Settlement Systems (PSS) Act, enabling the government to notify Merchant Discount Rate (MDR) on specified digital payment methods, including UPI.

Following concerns that users could be charged for UPI transactions exceeding ₹2,000, Finance Minister Nirmala Sitharaman clarified that end users will not be required to pay MDR. Instead, if the government introduces such a framework in the future, the charges would be applicable only to merchants covered under the notified rules. 

What Is MDR?

Merchant Discount Rate (MDR) is a processing fee paid by businesses to banks and payment service providers for accepting digital payments.

Traditionally, this fee is borne by merchants rather than customers. In the case of UPI, the Zero MDR policy introduced in recent years meant merchants were generally not charged this fee either. The recent legislative amendment creates a legal framework that could allow the government to specify MDR for certain digital transactions in the future. 

Will Customers Pay Anything?

Based on the Finance Minister's clarification, ordinary UPI users will continue to make payments without paying MDR.

The proposal under discussion relates to merchants accepting digital payments, not to individuals transferring money through UPI. Person-to-person (P2P) UPI transfers are also expected to remain outside the scope of any proposed MDR framework.

Why Is the Government Considering the Change?

Industry experts have argued that maintaining and expanding the country's digital payment infrastructure requires continuous investment.

The amendment allows the government flexibility to introduce an MDR framework in the future, which could help banks and payment service providers recover part of the cost of processing digital transactions and investing in technology, cybersecurity, and payment infrastructure. However, no final MDR structure has been officially notified yet. 

No Final MDR Notification Yet

Although Parliament has passed the enabling legislation, the government has not announced a final MDR rate, implementation date, or detailed applicability rules.

Any future rollout will require separate government notification specifying which transactions, merchant categories, or payment methods will be covered. Until then, UPI users can continue using the service under the existing framework. )

What UPI Users Should Know

• The Finance Minister has clarified that customers will not bear MDR charges if the framework is introduced.

• Any future MDR, if notified, would be applicable to eligible merchants, not end users.

• The law only creates the legal provision for MDR; the government has not yet issued final operational rules or rates.

• UPI continues to remain one of India's most widely used digital payment systems, and there is no announcement requiring customers to pay transaction charges for making UPI payments at present.