Finance Minister Nirmala Sitharaman has said that any Merchant Discount Rate imposed on digital transactions would apply to merchants rather than customers. She added that revenue generated through such a charge would enable banks and financial technology companies to invest further in payment infrastructure, innovation and security, ultimately benefiting users of the Unified Payments Interface.

Sitharaman made the remarks while responding on X to Congress leader Jairam Ramesh, who had claimed that ordinary people could face higher costs for using UPI. Rejecting the allegation, the minister said the Merchant Discount Rate, commonly known as MDR, is levied on merchants accepting digital payments and not directly on consumers making those transactions.

The finance minister also clarified that no decision on an MDR for UPI had yet been taken. She said the UPI and Services Steering Committee, headed by the National Payments Corporation of India, would consider the issue only after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026. The committee would therefore determine the matter at a later stage.

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Through the proposed legislation, the government is seeking authority to decide by notification which electronic payment methods or categories of transactions must remain free. The Bill proposes an amendment to Section 10A of the Payment and Settlement Systems Act, 2007, which currently provides legal support for the zero-MDR framework governing UPI and RuPay card transactions.

The Bill does not itself introduce an MDR or prescribe a specific charge. It would instead create the legal framework required for the government to modify the existing zero-MDR policy in the future. Ramesh argued that the cost could eventually burden ordinary users and disputed the government’s position that an MDR was necessary to ensure the financial sustainability of the UPI ecosystem.

Referring to Opposition protests that have disrupted proceedings in the Lok Sabha and Rajya Sabha since the Monsoon Session began on July 20, Sitharaman said the proposal could have been debated in Parliament if the Congress had participated constructively. The exchange has intensified the wider political debate over how India should finance its rapidly expanding digital-payment infrastructure while preserving affordable access for users.

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