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The ministry described allegations that MDR had been introduced because of external influence as “patently false and misleading”
The Finance Ministry said the 30 per cent market-share mandate could not be implemented earlier because companies other than the market leaders were unable to compete without a sustainable revenue model.
The Finance Ministry on Thursday rejected allegations that the introduction of Merchant Discount Rate (MDR) on select high-value UPI transactions was driven by external pressure, including concerns raised by the United States Trade Representative (USTR).
The ministry said the USTR’s 2026 report had raised two separate concerns relating to India’s digital payments ecosystem—the participation of US electronic payment services providers in UPI credit transactions and the 30 per cent market-share limit for third-party application providers.
However, it said the decision to introduce MDR was not linked to either of these concerns and was instead aimed at creating a “self-sustaining revenue model” for smaller domestic companies operating in the UPI ecosystem.
Few allegations are in the media that the MDR has been introduced because of external pressure. They are giving reference to US Trade Representative (USTR) report of 2026. The USTR report has raised the following two issues:(i) Inability of US electronic payment services… pic.twitter.com/iZ2qRPimfk
— DFS (@DFS_India) September 17, 2026
What Did The USTR Report Say?
The USTR’s 2026 National Trade Estimate report said the US had concerns about what it described as policies that appeared to favour Indian domestic electronic payment suppliers over foreign providers.
It specifically flagged the inability of US electronic payment services suppliers to participate in UPI, including credit transactions, on what it described as a level playing field with RuPay. The report also referred to NPCI’s 30 per cent market-share limitation for third-party UPI application providers, originally announced in November 2020 and currently scheduled for enforcement in December 2026.
The Finance Ministry, however, said the NPCI circular of September 15, 2026, allows credit transactions on UPI only through RuPay credit cards. According to the ministry, this is a deliberate policy aimed at enabling RuPay credit cards to become a preferred choice among users in India.
Why Has MDR Been Introduced?
The Finance Ministry said the 30 per cent market-share mandate could not be implemented earlier because companies other than the market leaders were unable to compete without a sustainable revenue model. It argued that introducing MDR on select high-value transactions would provide such a revenue stream and allow smaller companies to expand their operations and compete for a greater share of the UPI ecosystem.
The ministry therefore linked the MDR move to the government’s broader objective of increasing competition among domestic UPI players.
“Introduction of MDR on select high-value transactions will provide a self-sustaining revenue model to smaller companies to compete for higher share in the UPI ecosystem,” the Finance Ministry said.
The ministry also said the move was intended to allow more domestic companies to operate in UPI and was therefore a measure to protect India’s “sovereignty in the electronic payment ecosystem”.
Why Is RuPay Credit Free Of MDR?
The government also defended the decision to keep RuPay debit card transactions free of MDR.
The Finance Ministry said the government had promoted RuPay credit and debit cards to ensure that consumers had a strong domestic alternative in the payments space. “To ensure that the RuPay credit cards continue to grow, the debit card has been kept free of MDR,” it said.
The ministry described allegations that MDR had been introduced because of external influence as “patently false and misleading”.
UPI And The US Trade Concern
The USTR report’s concerns predate the latest MDR decision. Its 2026 report said two US-owned electronic payment application suppliers together processed more than 80 per cent of all UPI transactions as of December 31, 2025, while also noting India’s 30 per cent cap for third-party application providers.
The report forms part of the broader US assessment of foreign trade barriers and has repeatedly raised concerns about India’s electronic payments policies in previous years as well.
The Finance Ministry’s latest clarification comes a day after the government had said decisions relating to UPI charges were being taken independently, rejecting claims that the move was the result of external pressure.
Quick Answers
Ask News18The Finance Ministry introduced the Merchant Discount Rate (MDR) on select high-value transactions to create a self-sustaining revenue model for smaller domestic companies operating in the UPI ecosystem. This revenue stream is intended to help these smaller companies expand their operations, compete more effectively for a higher market share, and protect India’s sovereignty in the electronic payment ecosystem.
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The News Desk is a team of passionate editors and writers who break and analyse the most important events unfolding in India and abroad. From live updates to exclusive reports to in-depth explainers, …Read More
September 17, 2026, 1:50 PM IST
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