Government Stands Firm on 0.4% MDR for High‑Value UPI Payments

New Delhi – A modest‑looking 0.4% fee on big UPI payments has become the latest flashpoint in India’s fintech debate. On September 17, 2026, the government publicly defended the proposed merchant discount rate (MDR), insisting the charge is a tiny blip on the radar for consumers and merchants alike.

The proposal didn’t materialise in a vacuum. It traces back to the Standing Committee on Finance, which put the recommendation on the table on August 12, 2026. According to the committee’s minutes, members – including former Finance Minister P. Chidambaram, Manish Tewari, Gaurav Gogoi, Kishori Lal and K. Gopinath – voted in favour of a revenue model that would levy MDR on transactions above a certain threshold. No objection was raised by the opposition members present at the meeting.

From the government’s perspective, the 0.4% levy is “minimal”. A senior finance official told reporters that the fee would barely dent the average transaction amount, and that it would help fund the ongoing expansion of the UPI ecosystem, which has already become a lifeline for millions of Indians.

But not everyone is buying the story. Congress leader Rahul Gandhi slammed the move as a “UPI tax”, suggesting that the policy was drafted under pressure from foreign payment giants, especially those based in the United States. “It’s not about revenue; it’s about opening the door for outside players to dictate our payment landscape,” he said in a televised interview.

Merchant groups are echoing Gandhi’s concerns. Associations representing petroleum dealers, small retailers and larger businesses have warned that even a seemingly small surcharge could ripple through the supply chain, ultimately pushing prices up for everyday consumers. One shop owner from Delhi confessed, “If my margin shrinks by a fraction, I’ll have to raise prices – and that’s the last thing the common man needs right now.”

While the government argues that the fee applies only to high‑value transactions – those above ₹2,000, according to the draft – critics point out that the definition of “high‑value” could shift over time, potentially engulfing a broader swath of everyday payments.

As the debate heats up, the Ministry of Finance has indicated that the final rules will be rolled out after a short period of public consultation. Whether the 0.4% MDR will survive the political push‑and‑pull remains to be seen, but for now the country is watching closely, because in India a tiny percentage can mean a big conversation.