FinMin allays fears of increase in cash transactions post UPI MDR levy: Sources
GST
Dated:- 17-9-2026
PTI
New Delhi, Sep 17 (PTI) The Finance Ministry does not expect an increase in cash transactions due to the levy of 0.4 per cent Merchant Discount Rate (MDR) for UPI transactions above Rs 2,000, which comes into effect from October 15, sources said on Thursday.
Sources said it is anticipated that the imposition of MDR would not lead to a reduction in UPI transactions as only 4 per cent of total volume is getting impacted due to the decision.
Asked about the concerns leading to an increase in cash transactions post October 15, sources said it is unlikely to happen as transactions through RuPay debit cards are completely free regardless of amount.
The ministry is also preparing to put a monitoring mechanism in place to ensure that the UPI MDR burden is not passed on to customers, sources added, assuaging widespread concerns of transfer of MDR charges to end users
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ain UPI transactions above Rs 2,000 is aimed at creating a sustainable revenue framework for the digital payments ecosystem.
The MDR is a fee paid by merchants to payment service providers for processing digital transactions.
From October 15, a 0.4 per cent MDR will apply to person-to-merchant UPI payments above Rs 2,000. The charge will be paid by merchants, not consumers, and will be capped at Rs 300 for transactions of Rs 75,000 or more. Payments between individuals, as well as the vast majority of everyday merchant payments, will remain free.
Essential services, such as railways, telecom, fuel and insurance, will attract a flat Rs 5 fee per transaction above Rs 2,000. Capital markets transactions (mutual funds, stockbroking) get a lower 0.02 per cent rate, also capped at Rs 300.
Small merchants collecting up to Rs 1 lakh a month via UPI QR codes remain fully exempt from any new charge – a carve-out, officials say, shields about 96 per cent of all merchant transactio
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Department of Financial Services (DFS) issued the clarification in response to observations in the US Trade Representative's (USTR) 2026 report on the inability of US electronic payment service providers to participate in the UPI ecosystem, including credit transactions on UPI, on a level playing field with RuPay.
“The NPCI circular of September 15, 2026, does not allow credit transactions on UPI by any other credit card other than the RuPay credit card. There is a clear policy of only allowing the RuPay credit card on UPI to enable the RuPay credit card to become the preferred choice of credit card amongst users in India,” the DFS said in a post on X.
“The allegation that MDR has been introduced under any external influence is patently false and misleading,” it added.
The rejection comes amid allegations by some Opposition parties, including the Congress, that the government had succumbed to US pressure in deciding to impose a 0.4 per cent MDR on UPI transactions above Rs
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