NEW DELHI:
The government’s move to create a framework that could allow Merchant Discount Rate (MDR) on certain UPI transactions has triggered a political and public debate over the future of India’s widely used digital payment system.
Under a gazette notification issued on September 14, banks and payment-system providers cannot impose a direct or indirect charge on the person making or receiving a UPI transaction of up to ā¹2,000. The provision follows an amendment to Section 10A of the Payment and Settlement Systems Act, 2007.
The amendment creates an enabling framework for imposing MDR on UPI and other notified electronic payment modes. The government has maintained that consumers will not be directly charged for UPI transactions within the protected limit.
The issue has nevertheless drawn criticism from the Opposition. Congress leader Rahul Gandhi alleged that the move could eventually result in charges being imposed on users and argued that transactions above ā¹2,000 could be brought under MDR.
Gandhi also questioned whether the provision could eventually be extended to smaller transactions. His comments represent the Opposition’s political interpretation of the measure.
The government notification specifically protects UPI transactions up to ā¹2,000 from direct or indirect charges to the payer or recipient.
The amendment was passed by Parliament during the Monsoon Session, which concluded on August 13, 2026. The latest notification has since triggered discussion among consumers, digital-payment users and industry stakeholders over how the MDR framework may be implemented.
The debate comes at a time when UPI has become a major component of India’s retail digital-payment ecosystem, with millions of transactions being carried out every day.