No MDR on UPI Payments What the Finance Ministry Really Said
A recent social media storm falsely claimed that the Indian government plans to introduce Merchant Discount Rate (MDR) on UPI payments. This led to confusion among small businesses and digital users. Let’s break it down — officially and simply.
What Is MDR on UPI Payments?
- MDR (Merchant Discount Rate) is a fee charged by banks or payment providers from merchants for processing digital payments.
- On UPI, there is currently no MDR for most transactions. It’s free for customers and merchants alike — thanks to government policy.
Government’s Official Stand
Ministry of Finance on 12th June 2025:
“There is no proposal to impose MDR on UPI transactions. Reports suggesting such a move are completely false and misleading.”– Source: Ministry’s post on @FinMinIndia
Why This Clarification Matters
- UPI is India’s fastest-growing digital payment mode, with over 11 billion transactions in May 2025 alone.
- Small businesses rely on zero-cost UPI to accept payments.
- Any charge would impact digital penetration, financial inclusion, and consumer trust.
Expert Insight
Efiletax View:
The false news highlighted the importance of verifying tax and finance developments through official sources like the Ministry of Finance, RBI, and NPCI. Unverified claims can cause panic, especially for MSMEs depending on UPI.
UPI Growth Snapshot
| Month | UPI Transactions | Value (₹ Lakh Cr) |
|---|---|---|
| Mar 2025 | 10.9 billion | 18.3 |
| Apr 2025 | 11.3 billion | 18.7 |
| May 2025 | 11.6 billion | 19.1 |
Source: NPCI Monthly Data
Related Legal Note
As per RBI guidelines and Budget announcements since 2022:
- UPI remains a “zero MDR” instrument.
- The government compensates payment providers via a separate budget provision — ensuring no cost to merchants.
FAQs on UPI & MDR
Q1. Is UPI really free for merchants?
Yes, merchants don’t pay MDR for regular UPI transactions (P2M) — unlike credit/debit cards.
Q2. Will MDR ever be applied to UPI?
Currently, there’s no such proposal. Any future change will come only after stakeholder consultation and public notification.
Q3. What’s the logic behind zero MDR on UPI?
To promote digital adoption, especially among small merchants, and reduce the cash economy.
Final Word
The Finance Ministry has made it clear: UPI continues to be free. As a taxpayer, user, or business, always rely on official government updates — not viral forwards.
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Summary
Finance Ministry confirms no MDR on UPI payments. Claims about charges are false. UPI remains free for merchants and customers in 2025.