No US pressure in UPI MDR decision; NPCI circular offers no advantage to foreign credit cards: Finance Ministry

New Delhi: The Finance Ministry on Thursday dismissed allegations that US pressure influenced the decision to levy a 0.4 per cent Merchant Discount Rate (MDR) on select UPI payments, saying the latest NPCI guidelines do not offer any advantage to international credit cards over RuPay on the UPI platform.

The 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 RuPay credit card on UPI to enable RuPay credit card to become the preferred choice of credit card amongst users in India," the DFS said in a post on X.

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

"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 2,000.

The Finance Ministry's clarification indicates that the NPCI decision is part of an existing policy framework that permits only RuPay credit cards to be linked to UPI for credit transactions, rather than a measure aimed at providing access to foreign payment service providers.

The NPCI, which operates the UPI platform, on September 15 issued a circular providing for MDR on certain UPI transactions, with the move aimed at creating a sustainable revenue framework for the digital payments ecosystem.

On market share ceiling, it said that although National Payments Corporation of India (NPCI) mandated a market share limitation of 30 per cent for third-party application providers in November 2020. However, this mandate could not be implemented because companies other than the market leaders could not compete in the absence of a self-sustaining revenue model.

"Introduction of MDR on select high-value transactions will provide a self-sustaining revenue model to smaller companies to compete for a higher share in the UPI ecosystem. Thus, the introduction of MDR has been done with the intention of allowing more domestic companies to expand their operations," it said.

Contrary to misleading claims that MDR was introduced under external pressure, NPCI said the introduction of MDR on select high-value transactions will enable more domestic companies to operate under UPI.

Thus, the introduction of MDR is a step in protecting India’s sovereignty in the electronic payment ecosystem.

It further emphasised that the government has promoted RuPay credit and debit cards to show that people have a strong domestic alternative.

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As RuPay credit cards continue to grow, the debit card has been kept free of MDR, it added.

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 - railways, telecom, fuel and insurance - get 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 transactions.

UPI QR payments to merchants in rural and semi-urban areas will also remain free. Five per cent of MDR collections will go into a dedicated fund intended to expand UPI acceptance among small merchants.