Finance Minister Nirmala Sitharaman on Thursday pushed back against claims that ordinary UPI users could end up paying more, clarifying that any Merchant Discount Rate (MDR) on digital transactions would be levied on merchants and not on customers, according to Business Today. Responding to Congress leader Jairam Ramesh on social media platform X, Sitharaman said the purpose of MDR is to strengthen the digital payments ecosystem by enabling banks and fintech firms to invest in infrastructure, innovation and security.
Who bears the MDR cost?
In a post on X, Sitharaman wrote:
Before spreading a canard, @Jairam_Ramesh ji, please consider this: 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.
The finance minister's statement came after Ramesh argued that the burden of the MDR would ultimately be borne by ordinary people, and that the government's contention that such a charge is the only way to make UPI financially sustainable is "entirely wrong." Sitharaman rejected that assertion, maintaining that customers would not be required to pay the merchant fee.
No MDR decision until Bill is passed
Sitharaman also clarified that no decision has yet been taken on introducing an MDR on UPI transactions. The UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), will examine the matter only after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026. The proposed legislation empowers the central government to notify which electronic payment modes or transactions will continue to remain free. Sitharaman said the committee's deliberations on the merchant fee would take place only after the Bill receives parliamentary approval.
What the Bill does and does not do
The Taxation and Other Laws (Amendment) Bill, 2026 proposes an amendment to Section 10(A) of the Payment and Settlement Systems Act, 2007, giving the central government the legal authority to modify the existing zero-MDR framework for UPI and RuPay card transactions.
The Bill itself does not introduce a Merchant Discount Rate or prescribe any fee. Instead, it creates the legal framework under which the government may decide to modify the current zero-MDR regime through a notification at a later stage.
| Issue | Sitharaman's position | Jairam Ramesh's position |
|---|---|---|
| Who pays MDR? | Only merchants, not end users/customers | Burden ultimately borne by ordinary people |
| Why levy MDR? | To let banks and fintech invest in infrastructure, innovation, security | Government's claim that it's the only way to make UPI sustainable is "entirely wrong" |
| When will a decision be made? | Only after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026 | — |
What this means for merchants
The clarification is directly relevant to merchants, marketplace operators and B2B platform managers in India that accept UPI payments. Under the current zero-MDR framework for UPI and RuPay, merchants are not charged a merchant discount rate. The Bill, if passed, would allow the central government to modify that framework through a notification. Any such modification would, according to the finance minister, apply to merchants and not to customers. The source report provides no specific rate, timeline or implementation mechanism; the first step is the Bill's passage and the subsequent examination by the NPCI-headed committee.
Parliamentary context
Sitharaman also criticised the opposition over repeated disruptions during the ongoing Monsoon session of Parliament, saying the proposed legislation could have been debated if proceedings had not been stalled. Referencing disruptions in both the Lok Sabha and the Rajya Sabha since the Monsoon session began on July 20, she said, "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)."
The exchange on X highlights the political sensitivity of any move to charge MDR on UPI, which has become the dominant digital payments rail in India. For now, the zero-MDR framework for UPI and RuPay remains unchanged, and customers will not bear any merchant fee, according to the finance minister's clarification. The next milestone for merchants is the Bill's parliamentary passage, after which the NPCI-headed committee is expected to examine the MDR question.
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