DFS rejects claims MDR on UPI due to external pressure as 'misleading'

The DFS rejected allegations that MDR on high-value UPI transactions was introduced under US pressure. It clarified the move aims to create a sustainable revenue model for smaller domestic companies and protect India's payment ecosystem sovereignty.

Department of Financial Services (Photo/X@DFS_India)

DFS Refutes Link to USTR Report

The Department of Financial Services (DFS) on Thursday rejected allegations that the Merchant Discount Rate (MDR) on select high-value UPI transactions has been introduced under external pressure, calling the claims "patently false and misleading." In a post on X, the department said some allegations in the media had linked the introduction of MDR to concerns raised in the 2026 report of the US Trade Representative (USTR). The post said USTR report had raised concerns over 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. It had also referred to NPCI's 30 per cent market-share limit for third-party application providers, which was announced in November 2020 and is currently due for enforcement in December 2026.

RuPay-Only Policy for UPI Credit Transactions

Responding to the first issue, DFS said the NPCI circular dated September 15, 2026, does not allow credit transactions on UPI through any credit card other than RuPay credit cards.

"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 Department said.

MDR to Support Domestic UPI Players

On the 30 per cent market-share limit, DFS said the mandate could not be implemented as companies other than the market leaders were unable to compete in the absence of a self-sustaining revenue model. It said the introduction of MDR on select high-value transactions would provide smaller companies with a sustainable revenue model and allow them to compete for a higher share of the UPI ecosystem.

A Move to Protect 'Sovereignty in Payments'

"Thus introduction of MDR has been done with the intention of allowing more domestic companies to expand their operations," DFS said.

The Department further said the measure would allow more domestic companies to operate under UPI and described it as a step towards protecting India's sovereignty in the electronic payments ecosystem.

"Contrary to misleading claims made that MDR has been introduced under external pressure, introduction of MDR on select high-value transactions will enable more domestic companies to operate under UPI," it said.

DFS also said the government has promoted RuPay credit and debit cards to provide consumers with a strong domestic alternative, while keeping debit cards free of MDR.

"The allegation that MDR has been introduced under any external influence is patently false and misleading," the Department said. (ANI)

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