New Delhi — India’s decision to introduce a Merchant Discount Rate (MDR) on some Unified Payments Interface (UPI) transactions has opened a fresh political dispute between the Congress and the Narendra Modi government, with the opposition party alleging that the policy change is linked to pressure from the administration of US President Donald Trump.
Congress general secretary in charge of communications Jairam Ramesh on Wednesday accused the government of abandoning the long-standing zero-MDR model for UPI in order to accommodate American payment companies. He also used the acronym NOTA — normally associated with “None of the Above” on Indian ballot papers — to describe what he called “Narendra’s Ongoing Trump Appeasement”.
The allegation comes a day after the National Payments Corporation of India (NPCI) announced a new MDR framework under which a 0.4% charge will apply to specified person-to-merchant UPI transactions above ₹2,000 from October 15. The charge will be capped at ₹300 for transactions of ₹75,000 and above.
The new framework does not impose a charge on ordinary users making person-to-person UPI payments. Transactions of up to ₹2,000 to merchants will also remain free, while eligible small merchants continue to receive zero-MDR protection. The government says around 96% of all person-to-merchant UPI transactions will remain unaffected.
The distinction between consumers and merchants is at the centre of the political argument.
Ramesh questioned why the government had decided on a 0.4% MDR and whether the rate was intended to bring UPI closer to the economics of conventional card payments.
“Why 0.4% MDR? Is it because debit card MDR is also 0.4%?” he asked in a post on X. He also questioned whether the policy was designed to give US-based card networks such as Visa and Mastercard greater room to compete with UPI.
The Congress leader linked the decision to concerns previously raised by the United States over India’s payments ecosystem. In its 2026 National Trade Estimate report, the US Trade Representative had raised concerns about Indian policies relating to electronic payment services, arguing that they appeared to favour domestic suppliers and created what Washington viewed as an uneven competitive environment for foreign providers. The issue has subsequently become part of the wider debate over India-US trade relations.
However, the Indian government has rejected the suggestion that the UPI policy is being driven by American pressure. The Finance Ministry has said the framework is intended to support the long-term sustainability of the payments ecosystem, investment in infrastructure and cybersecurity, while keeping UPI free for consumers.
The government also stresses that MDR is not a tax collected by the government. It is a fee within the merchant-payment ecosystem, with the proceeds distributed among participating banks, payment service providers and UPI applications. The stated objective is to create a sustainable source of funding as the system continues to expand.
The controversy nevertheless brings the US-India trade relationship directly into India’s domestic payments debate.
Ramesh argued that Washington’s concerns about UPI have coincided with the government’s move away from a completely zero-MDR system. He asked whether the change would effectively open more space for American payment companies at a time when UPI has become the dominant digital payments platform in India.
UPI processed about 24 billion transactions worth $311 billion in August 2026, according to Reuters, underlining the scale that the system has achieved since its launch. Its rapid expansion has reduced the role of conventional card payments in many everyday transactions and created a large account-to-account payments ecosystem.
For the Congress, the issue is therefore about more than a 0.4% merchant fee. Ramesh has argued that the government should not alter the economics of a system that has become a major component of India’s digital public infrastructure because of pressure from foreign companies or governments.
He also questioned the government’s argument that MDR is necessary to make UPI financially sustainable. Ramesh cited an estimated annual cost of around ₹20,000 crore for operating the wider UPI ecosystem and compared it with transfers of surplus by the Reserve Bank of India to the Union government.
The government and RBI have taken a different view, arguing that the enormous expansion of UPI requires a sustainable funding mechanism for banks, payment providers, cybersecurity and technological infrastructure. The RBI has backed the new MDR framework as a measure intended to strengthen the long-term viability of the payments ecosystem.
The political dispute is unfolding against a broader backdrop of strained India-US trade relations under President Trump. Congress has argued that New Delhi has been making concessions to Washington on several fronts, while the government has maintained that its decisions are guided by India’s economic and strategic interests.
The UPI controversy is likely to remain part of that wider argument. For the government, the new framework is presented as a way of financing an increasingly large payments network without charging consumers. For the Congress, the timing of the policy and its potential impact on the competitive position of global card companies raise questions about whether domestic payments policy is being shaped partly by US trade concerns.
What is clear is that the immediate change is directed primarily at merchants rather than ordinary UPI users. Whether the new MDR model ultimately strengthens the financial sustainability of UPI, changes competition between payment networks, or affects prices for consumers will depend on how merchants, banks and payment providers respond after the framework comes into force in October.
