No MDR on UPI: Govt slams 'baseless' reports, reaffirms free digital payments

Amid a flurry of online speculation, the Finance Ministry has categorically denied any plans to levy a merchant discount rate (MDR) on Unified Payments Interface (UPI) transactions, calling the reports “completely false, baseless, and misleading.”

In a strongly worded rebuttal, the ministry said, “Such baseless and sensation-creating speculations cause needless uncertainty, fear, and suspicion among citizens. The Government remains fully committed to promoting digital payments via UPI.”

The clarification came after several media reports claimed that the government was mulling over charging MDR on high-value UPI transactions—a move that, if implemented, could have reversed the zero-cost digital payment push that has underpinned India’s fintech revolution.

MDR is a fee typically charged by banks to merchants for facilitating real-time payment transactions. Before 2020, merchants paid around 1% of the total value on card-based transactions. To accelerate digital adoption, the government had waived MDR on UPI and RuPay card transactions.

UPI continues to set records

Even as speculation swirled, data released by the National Payments Corporation of India (NPCI) showed UPI’s continuing dominance. In May alone, UPI processed 18.68 billion transactions worth ₹25.14 lakh crore, up from ₹23.95 lakh crore in April. On a daily average, this translates to ₹81,106 crore across 602 million transactions.

The growth is not just monthly—on a year-on-year basis, May's transaction volume rose 33% compared to 14.03 billion transactions in May 2024.

The Reserve Bank of India’s annual report further cements UPI’s centrality in India’s digital economy. In FY25, the platform facilitated 185.8 billion transactions, a 41% jump from the previous year, with the total transaction value climbing to ₹261 lakh crore from ₹200 lakh crore in FY24.

Global leader in real-time payments

UPI’s success story is not confined to India. The RBI noted that UPI accounted for 48.5% of global real-time payment transactions, placing India firmly at the top of the international digital payments landscape.

Overall digital payments in India—across UPI, card networks, and prepaid payment instruments—grew by 35% to 221.9 billion transactions in FY25, with a total transaction value of ₹2,862 lakh crore, a 17.97% increase from the previous year.

As the numbers underscore India’s digital leap, the government’s assurance of zero MDR charges on UPI transactions may further solidify public trust and fuel the growth of cashless commerce.