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The people’s newsroom

Fact checkUPI

Sitharaman's claim that UPI MDR falls only on merchants is mostly true

NPCI's framework puts the new fee on merchants and keeps person-to-person transfers free. Above ₹2,000, though, that rests on NPCI's rules, not the law.

From the editorial deskPublished

The claim

"Merchant Discount Rate (MDR) applies only on the merchants and not on the end users/customers." UPI will remain free for consumers.

Claim by: Nirmala Sitharaman, Union Finance Minister
Seen on: Public reply to Jairam Ramesh reported by Business Today; repeated in the Rajya Sabha, first seen 6 August 2026

Verdict: Mostly true

  1. True
  2. Mostly true
  3. Misleading
  4. False

What we found

Nirmala Sitharaman’s claim is mostly true. Under the framework NPCI announced on 15 September, the new 0.4% merchant discount rate (MDR) on UPI payments above ₹2,000 is paid by merchants, person-to-person transfers stay free, and merchants may not pass the fee on to customers.

Two caveats apply. The legal bar on charging users now covers only UPI payments up to ₹2,000, so above that line consumer protection rests on NPCI’s rules. And a cost borne by large merchants could still reach shoppers through prices.

The Finance Minister's assurance and what followed

  1. 6 Aug 2026Sitharaman replies to Jairam Ramesh: MDR applies only to merchants
  2. 8 Aug 2026Finance Ministry statement says UPI will remain free for citizens
  3. 10 Aug 2026Rajya Sabha passes the Bill after the FM's assurance
  4. 14 Sep 2026Charge-free protection notified for UPI payments up to ₹2,000
  5. 15 Sep 2026NPCI sets 0.4% merchant MDR above ₹2,000 from 15 October

The evidence

What Sitharaman said

Replying to Jairam Ramesh on 6 August 2026, the Finance Minister said: “Merchant Discount Rate (MDR) applies only on the merchants and not on the end users/customers.” Business Today reported that she also said the NPCI-led steering committee had not yet decided on MDR. Moneylife reported that she assured the Rajya Sabha that the legislation does not impose any tax or transaction charge on consumers using UPI.

Sources:Business Today, 6 August 2026Moneylife

NPCI’s framework puts the fee on merchants

ANI reported NPCI as saying “consumers will continue to transact free of cost using UPI”. The 0.4% fee, capped at ₹300, applies to person-to-merchant payments above ₹2,000 from 15 October, and P2P transfers are outside its scope. SCC Online’s summary of NPCI’s FAQ says merchants “will not be permitted to pass MDR charges on to customers” and that UPI apps may not add platform fees.

Sources:ANI via Khaleej Times, 16 September 2026SCC Online, 16 September 2026

The 14 September notification (S.O. 5067(E)) bars banks and system providers from imposing any charge, “whether directly or indirectly”, on UPI payments up to ₹2,000 and on RuPay debit cards, LiveLaw reported. Payments above ₹2,000 are not on that list, so the bar on user charges there comes from NPCI’s framework rather than the notification.

Source:LiveLaw, 15 September 2026

Prices could still carry the cost

Deccan Chronicle reported that it “remains to be seen” whether large merchants will pass the cost on through higher retail prices. A ban on surcharges does not prevent that.

Source:Deccan Chronicle, 15 September 2026

Why this claim spread

The statement was a direct public reply to Jairam Ramesh, tagging him and the Congress, according to Business Today. Two days later the Finance Ministry said UPI transactions “will remain completely free for citizens”, in Business Today’s paraphrase, and called suggestions that “external influences” were driving policy “unfounded, completely false and misleading”. The desk has no sourced data on how widely the Minister’s statement was shared.

Source:Business Today, 8 August 2026

The documents