The Finance Ministry firmly rejected reports speculating that the Government is going to impose Merchant Discount Rate (MDR) charges on high-value Unified Payments Interface (UPI) transactions. The report called the speculations “false, baseless, and misleading” and also misspoke and acted as a misunderstanding aiming to deter public uncertainty caused by unidentified sources online.

Earlier in the day, reports about MDR soon being applied to large ticket UPI payments had circulated by different media outlets as well as social media users; the claims circulated quickly and created concern among digital payment users and merchants in all areas of the country.

‘False and Misleading’ – Finance Ministry Responds

In a strongly worded statement, the Finance Ministry said, “The speculations and claims that the MDR will be charged on UPI transactions are completely false, baseless, and misleading.” The ministry warned that such rumors only serve to create “unnecessary uncertainty, fear, and suspicion among citizens.”

The clarification comes at a time when UPI, India’s flagship digital payment platform, is seeing record-breaking transaction volumes and an expanding global presence. Government officials emphasized that promoting digital payments remains a key policy focus and reiterated that no changes have been made to the current zero-MDR regime for UPI.

UPI Sees Recovery After Brief Dip in April

As per figures published by the National Payments Corporation of India (NPCI), UPI handled an impressive 18.68 billion transactions in May 2025, after a brief dip in April when there were 17.89 billion transactions. On a value basis, May's figure was at ₹25.14 lakh crore, a sharp increase from April's ₹23.95 lakh crore.

This is a 33% year-on-year increase in transaction value, with May 2024 recording 14.03 billion transactions. The daily transaction value averaged ₹81,106 crore, while the daily transaction volume averaged about 602 million, reflecting the continued dominance of UPI in the Indian payment space.

Recent Disruptions Triggered Market Concerns

The clarification also follows a string of technical disruptions in UPI services over the past few months. On April 12, a major service outage left thousands of users unable to complete transactions. NPCI attributed the disruption to a surge in API requests—particularly the overuse of the “Check Transaction” API by certain banks—causing a temporary system slowdown and reduced success rates.

Despite these hiccups, the UPI system quickly bounced back, with transaction volumes surging in May. NPCI has yet to release app-wise data for the month, but previous reports show that PhonePe and Google Pay continue to dominate, collectively accounting for over 80% of the UPI market share. New players such as Super. Money (Flipkart-backed), Navi, BHIM, and Cred is steadily making inroads through cashback incentives and user rewards.

No MDR, But Industry Demands Remain

While the Finance Ministry has ruled out MDR charges, calls from within the fintech industry to reintroduce such fees persist. In March, the Payments Council of India (PCI)—a representative body for digital payment firms—wrote to Prime Minister Narendra Modi requesting a 0.3% MDR on UPI transactions for large merchants and a nominal MDR for RuPay debit card transactions.

Fintech companies argue that while UPI transactions are free for end-users, infrastructure maintenance comes at a cost for platforms and banks. With the exponential rise in UPI usage, many industry players believe the zero-MDR model is financially unsustainable in the long run.

Government’s Incentive Push Faces Criticism

In an effort to alleviate the burden, the Union Cabinet recently approved a ₹1,500 crore incentive scheme to support stakeholders in the UPI ecosystem for facilitating small-value transactions. The move aims to maintain and boost adoption rates, especially in rural and semi-urban regions.

However, the announcement has not gone down well with all fintech firms. Critics argue that the allocation is inadequate given the sheer volume and scale of UPI transactions across the country. Many believe that a re-evaluation of the zero-MDR model is necessary for long-term sustainability.

NPCI Extends Market Share Cap Deadline

In another significant update, the NPCI has pushed back the deadline for introducing a 30% market share cap on third-party UPI apps—originally suggested in 2020—to December 2026. The cap is intended to alleviate concentration risk in the UPI space, which is currently dominated by a handful of players. The deadline was extended because of the absence of viable challengers in the market and the necessity of ensuring service continuity.

UPI’s Global Footprint Expands

In addition to local success, UPI is also making waves worldwide. The electronic payment system has reached overseas markets in Singapore, the UAE, Mauritius, Sri Lanka, France, Bhutan, and Nepal, reinforcing India's stature as a fintech leader.

Ever since it was launched in 2016, UPI has remained the fulcrum around which the digital payments revolution in India has turned. Riding the wave of the government's post-demonetisation push, increasing smartphone penetration, and the big-ticket entry of private players like Google Pay, PhonePe, and Paytm, UPI has revolutionized the way India pays.

No Charges, Only Growth for Now

In spite of contentious debate in the sector, the Finance Ministry's promise of no MDR on UPI transactions gives users and merchants respite for the time being. As UPI keeps going from strength to strength—both domestically and internationally—the test is to balance fast growth with resilience in the system and financial sustainability for the stakeholders.

For the time being, UPI users can go ahead and make hassle-free digital payments—without worrying about additional charges.

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