Congress Accuses PM Modi of Bending To US Pressure Over New UPI Charges
Congress Questions Centre Over New UPI MDR Policy
The Congress on Wednesday accused the Narendra Modi government of yielding to alleged US pressure by introducing a Merchant Discount Rate (MDR) on certain UPI transactions, with party general secretary Jairam Ramesh questioning whether the move was intended to help American card companies compete with UPI. Ramesh described the government's decision as “Narendra's Ongoing Trump Appeasement” and linked the issue to broader India-US trade tensions. His comments came a day after the government announced a new UPI merchant-fee framework that will take effect from October 15, 2026.
Under the new framework, a 0.4% MDR will apply to specified person-to-merchant UPI transactions above ₹2,000, with the charge capped at ₹300 per transaction. The fee is to be paid within the merchant payment ecosystem rather than directly by consumers. The government has said person-to-person UPI payments will remain free, while payments to merchants up to ₹2,000 and transactions by eligible small merchants will continue to attract zero MDR. According to the Finance Ministry, about 96% of merchant transactions will remain unaffected by the new framework.
Ramesh questioned the rationale behind setting the MDR at 0.4%, asking whether the rate was linked to the MDR applicable to debit-card transactions. He also asked whether the new structure would enable US-based card companies such as Visa and Mastercard to compete more effectively with UPI. These are political allegations from the Congress and have not been established by the government as the reason for introducing the new MDR framework. The Finance Ministry has instead said the changes are intended to support the long-term sustainability, resilience and expansion of the UPI ecosystem.
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The Congress leader also referred to recent comments and actions concerning UPI and US trade policy. Ramesh said the US Trade Representative had earlier criticised UPI's zero-cost model and argued that its free structure had affected the position of American card networks in India. He further linked the UPI controversy to the wider dispute over tariffs and other trade measures between Washington and New Delhi. The Congress has used those developments to question the government's handling of negotiations with the Trump administration.
Ramesh also cited proposed US tariff measures and immigration-related policies while criticising the government's approach towards Washington. He referred to a proposed 100% tariff measure targeting countries that continue certain imports of Russian crude and to changes affecting H-1B visa holders. These references formed part of his broader political argument about India's relationship with the United States. They were presented by Ramesh as reasons to question whether the government had made concessions to Washington; they do not by themselves establish a connection between those US policies and India's UPI MDR decision.
The government's stated rationale for introducing MDR is different. The Finance Ministry said the framework is designed to create a revenue mechanism for the payment ecosystem while keeping UPI free for individuals and protecting small merchants. MDR revenue will be distributed among participants such as banks and payment-app providers rather than collected as a government tax. The framework also provides lower or fixed rates for selected sectors, including railways, telecom, insurance, fuel and agricultural inputs, while 5% of total MDR collections will be allocated to a fund aimed at promoting UPI adoption among small merchants.
The new system therefore changes the economics of some higher-value merchant transactions without ending free UPI payments for individuals. The Congress has questioned the policy's motivation and its possible implications for competition with international card networks, while the government has defended it as a measure intended to provide a sustainable financial model for UPI. The 0.4% MDR framework will come into force on October 15, with the final impact on merchants, payment companies and transaction patterns expected to become clearer after implementation.
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