Doomdooma: Assam Pradesh Congress Committee president Gaurav Gogoi has questioned the Centre’s decision to introduce a 0.4 per cent Merchant Discount Rate (MDR) on specified high-value UPI payments to merchants, pointing to the Finance Ministry’s categorical rejection of reports about such a move in June 2025.
The new framework, announced this week, will take effect from October 15, 2026. Under the revised system, a 0.4 per cent MDR will apply to 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. Person-to-person payments will remain free, while the Finance Ministry has said around 96 per cent of P2M transactions will remain unaffected.
Gogoi referred to a June 11, 2025, statement by the Finance Ministry, which had described reports about imposing MDR on UPI transactions as “false, baseless and misleading”. The ministry had also said such speculation could create unnecessary uncertainty and concern among citizens.
Questioning the change in policy, Gogoi asked why the government had rejected the possibility of UPI MDR in 2025 but had now introduced charges for specified merchant transactions.
He also raised questions about how the revenue generated under the new framework would be distributed, citing the substantial market share held by major UPI applications such as PhonePe, Google Pay and Paytm.
Gogoi further referred to the ownership structures of major payment platforms and argued that the revised revenue mechanism could benefit companies with significant positions in India’s UPI ecosystem.
The Congress leader also linked the policy change to broader household economic pressures, citing inflation, unemployment and rising expenses, and questioned the rationale behind introducing MDR at the present time.
The government, however, has said the MDR is not a tax or a charge collected by the government or NPCI. According to the Finance Ministry, the revenue will be distributed among participants in the payment ecosystem, including banks and payment application providers, to support the operation and expansion of UPI.
Under the new framework, P2P transactions will remain free, while payments to merchants up to Rs 2,000 and transactions covered by the zero-MDR framework for eligible small merchants will also remain free. The government has said the changes are intended to create a financially sustainable model for the rapidly expanding UPI ecosystem while keeping costs off consumers.