Government rejects foreign influence claims over new UPI charges

The government on Wednesday rejected claims that foreign influence prompted its decision to impose a 0.4% merchant discount rate (MDR) on certain UPI transactions above Rs 2,000, saying India’s digital payments policy is decided independently.

The Finance Ministry said the charge, effective from October 15, would apply only to merchant payments and would not affect person-to-person (P2P) transactions.

“Some claims suggest the change is due to foreign influence. This is false,” the ministry said in a post on X, adding that UPI policy was aimed at creating a “self-sustaining, inclusive, and affordable digital payments ecosystem”.

Customers will continue to make UPI payments without charges, including transfers to friends and payments at shops through QR codes. P2P transfers will remain free regardless of the amount.

The ministry said more than 95% of merchant transactions are below the Rs 2,000 threshold. It also said small merchants earning up to Rs 1 lakh a month through UPI QR codes would continue to pay no charges.

The 0.4% MDR on transactions above Rs 2,000 will be borne by merchants, the government clarified. Payments for essential services, including train tickets, fuel and telecom services, will instead attract a flat Rs 5 charge per transaction above Rs 2,000.

The clarification followed allegations by the Congress that the new fee was introduced following a US demand. Congress leader Rahul Gandhi accused Prime Minister Narendra Modi of yielding to US President Donald Trump and described the new MDR as a tax on Indians.

Rahul Gandhi also alleged that the policy would transfer money to the United States. The government’s statement rejected the claim about foreign influence but did not directly respond to the remarks.