Finance Minister Nirmala Sitharaman has clarified that the Merchant Discount Rate (MDR) on digital transactions is levied on merchants, not customers, aiming to bolster digital payment infrastructure and innovation, amidst parliamentary debate on the Taxation and Other Laws (Amendment) Bill, 2026.
Key Points
- Finance Minister Nirmala Sitharaman clarified that Merchant Discount Rate (MDR) applies to merchants, not customers, for digital transactions.
- MDR charges are intended to help banks and fintech companies invest in better infrastructure, innovation, and security for digital payments.
- The decision on MDR for UPI will be made by a committee only after the Taxation and Other Laws (Amendment) Bill, 2026, is passed by Parliament.
- The proposed bill provides legal backing for the government to potentially modify the existing zero-MDR framework for UPI and RuPay card transactions.
- Sitharaman criticised parliamentary disruptions, suggesting they hinder discussion on important legislation like the MDR amendment bill.
Finance Minister Nirmala Sitharaman on Thursday said the Merchant Discount Rate on digital transactions applies to merchants and not to customers, and the MDR charge would support banks and fintech to invest more on infrastructure and security.
Hitting out at Congress leader Jairam Ramesh over his remark that ordinary people may have to pay more for using UPI, Sitharaman, in a post on X, said the UPI and Services Steering Committee headed by NPCI is yet to decide on the MDR, which would happen only after Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026.
Understanding Merchant Discount Rate (MDR)
Through the bill, the government has proposed that the central government can decide, via a notification, which electronic payment modes or transactions would remain free.
Ramesh, in a post on X, alleged that the burden of MDR will fall on ordinary people, and the government's claim that this is the only way to keep UPI financial sustainable is "entirely wrong".
Replying to Ramesh, Sitharaman said, "Before spreading a canard, @Jairam_Ramesh ji, please consider this: Merchant Discount Rate (MDR) applies only on the merchants and not on the end users/customers. It will support the Banks & Fintech to invest more on infrastructure, innovation & security. All users of UPI will reap the benefits of this investment."
Parliamentary Debate On Digital Payment Policy
Sitharaman also said that a committee will decide on the MDR only after Parliament passes the Taxation and other laws (amendment) Bill.
Referring to the opposition protest in Parliament since the beginning of the Monsoon session on July 20, which has disrupted the proceedings of both the Lok Sabha and Rajya Sabha, Sitharaman said the bill "could have been discussed on the floor of the House if your party @INCIndia engages constructively in Parliament when the Bill was/is tabled. (LS/RS respectively)".
Through the Taxation and other Laws (Amendment) Bill, 2026, the government proposes to amend Section 10(A) of the Payment and Settlement Systems Act, 2007, which gives legal backing to the government to modify the zero-MDR framework on UPI and RuPay card transactions.
While the Bill itself neither introduces a merchant discount rate (MDR) nor specifies a fee, it creates the legal backing for the government to modify the zero-MDR framework later.
