The Indian government has introduced a 0.4% merchant discount rate (MDR) on UPI transactions above ₹2,000, sparking a political dispute with Congress leader Rahul Gandhi. Gandhi accused Prime Minister Narendra Modi of prioritizing US interests by imposing the fee, which affects merchants using the popular digital payment platform. The announcement has led to a war of words between the ruling party and Congress MPs, highlighting the contentious nature of the new charges, according to livemint.com.
Rahul Gandhi criticized the government decision, alleging it amounts to ‘prostrating’ before the US by sending money abroad. Congress MPs’ panel members have also voiced opposition, prompting responses from government representatives like Gogoi and Tewari. The government defended the move, questioning Gandhi’s rationale and emphasizing the need for a sustainable payments ecosystem. The MDR applies specifically to transactions exceeding ₹2,000, aiming to generate revenue from high-value digital payments, as reported by livemint.com.
Industry leaders have noted that while the 0.4% MDR introduces a new revenue stream for payment fintechs, it will not immediately make these companies profitable. The payments sector has operated for years without MDR, relying on scale and ancillary services for revenue. The new charges are seen as a step toward sustainable profitability but will only partially offset the zero-MDR environment. This development places India’s digital payments ecosystem in line with global practices, according to bfsi.economictimes.indiatimes.com.
The government’s MDR policy took effect this month, with the payments industry adjusting to the new fee structure. The next key indicator of the policy’s impact will be fintechs’ financial reports for the quarter ending September 2026, which will reveal how the MDR influences revenue and profitability across the sector, as noted by bfsi.economictimes.indiatimes.com.