New Delhi, September 16: Political reactions have emerged over the introduction of a 0.4 per cent Merchant Discount Rate (MDR) on specified UPI merchant transactions above Rs 2,000, with BJP MP Anurag Thakur defending the revised framework and NCP(SP) spokesperson Clyde Crasto questioning its potential impact on consumers.
The reactions follow a new framework notified by the Centre and a subsequent circular issued by the National Payments Corporation of India (NPCI) on September 15. The revised framework provides for a 0.4 per cent MDR on specified person-to-merchant (P2M) UPI transactions above Rs 2,000, with the charge capped at Rs 300 for transactions of Rs 75,000 and above.
The framework is scheduled to take effect from October 15, 2026. Person-to-person (P2P) UPI transactions will continue to remain free irrespective of the amount transferred. Merchant payments up to Rs 2,000 will also remain free, while specified small merchants covered under the zero-MDR framework will continue to receive payments without MDR.
Speaking on the development, BJP MP Anurag Thakur highlighted the widespread adoption of digital payments in India and its use among small businesses and individual users.
“India’s digital transactions are now cited as an example across the world. Prime ministers and presidents of major countries come to India and see how easily even a roadside vendor, tea seller, small shopkeeper, and individuals can make payments through digital transactions,” Thakur said.
He also criticised the Congress over its response to the new framework and called for a detailed examination of the provisions.
“I think the Congress’ only job is to mislead people and criticise. I believe this report needs to be studied in greater detail and examined seriously,” he said.
Thakur also pointed to the exemption for transactions up to Rs 2,000 and said that there was no transaction charge on such payments. He further cited the government’s assessment that about 96 per cent of merchant transactions would remain unaffected.
The Ministry of Finance has clarified that MDR is not a tax and is not collected by the government or NPCI. Instead, it is a charge within the payment ecosystem that is distributed among participating entities, including banks and payment application providers.
NCP(SP) National Spokesperson Clyde Crasto, however, criticised the move and argued that merchants could eventually seek to recover the additional cost from customers.
“The Bharatiya Janata Party government at the Centre has found yet another way to trouble people. Now they are saying that a tax will be imposed on UPI transactions,” Crasto said.
“If a person makes a purchase, the shopkeeper will have to pay the tax. And they say that the shopkeeper will pay this tax. Tell me, which shopkeeper will pay it out of his own pocket? Why would he take that burden? Somewhere, he will find a way to pass that burden on to the customer who is making the purchase,” he added.
The government, however, has specifically stated that customers will not be required to pay MDR. Banks have been advised to ensure that merchants do not pass the charge on to customers, while UPI application providers have been prohibited from imposing platform fees or hidden charges under the framework.
The revised system also provides for a flat MDR of Rs 5 on transactions above Rs 2,000 in specified essential and thin-margin sectors, including railways, telecommunications, insurance, fuel and agricultural inputs. Capital-market transactions have been assigned a lower MDR of 0.02 per cent, capped at Rs 300 per transaction.
According to the Finance Ministry, the revised framework is intended to provide a funding mechanism for the continued operation and expansion of the UPI ecosystem while protecting individuals and small merchants from additional payment costs.
UPI has become a major part of India’s retail digital payments system. NPCI data shows that UPI recorded more than 24.5 billion transactions worth nearly Rs 29.82 lakh crore in August 2026 alone.
The political debate over the revised MDR framework is therefore centred on how the cost of maintaining and expanding the UPI ecosystem should be distributed, particularly for higher-value merchant transactions, while the government maintains that consumers and the vast majority of merchant transactions will remain outside the charge.
