look news india
Amidst the uproar and opposition from traders regarding Merchant Discount Rate (MDR) on Unified Payments Interface (UPI), official sources of the Central Government have made the situation completely clear. The government has made it clear that the date for implementation of the new MDR framework will not be extended and it will be effective from the already scheduled date i.e. 15 October 2026. With this, all the misconceptions spread regarding the MDR charge on purchase of petroleum products (petrol-diesel), its impact on common consumers and the future plans of the government have been put to an end.
Government sources have completely rejected all the speculations claiming that the government may extend its deadline due to opposition from traders and petrol pump associations. According to official sources, the new MDR rules will be implemented as scheduled from October 15, 2026.
The government has also reiterated that this decision will not impose any additional burden on the general public and small businessmen. Nearly 96 percent of UPI merchant transactions in the country are of less than Rs 2,000, which will be completely within the scope of zero-MDR. Additionally, small merchants with monthly UPI QR turnover up to Rs 1 lakh will also be completely exempted from this fee.
The government has clarified the situation for the petroleum sector after the Petroleum Dealers Association protested against UPI transactions of more than Rs 2,000. Government sources said that the standard charge of 0.4% will not be applicable for essential and thin margin sectors like fuel, railways, telecom, insurance and agricultural inputs.
A flat MDR charge of only Rs 5 has been fixed on UPI payments above Rs 2,000 at petrol pumps. However, citing fixed commission, Petroleum Dealers (AIPDA) have demanded complete waiver of this also. Government sources say that the Department of Financial Services (DFS) is doing a technical review of this report of the dealers, but till now no formal proposal has come from the Petroleum Ministry at the top level to withdraw or remove this flat charge of Rs 5.
The sources also cleared the misconception that MDR is a new cess or tax imposed by the government. MDR is purely a payment processing charge, which is shared between banks and fintech companies to maintain digital infrastructure, servers, cyber security and fraud prevention.
Out of this 0.4% fee, 40% is given to the card/account issuing bank, 30% to the merchant acquirer bank, 20% to the UPI app/third party app and 10% to the paired PSP bank. The share of Government of India in this entire fee is zero (0%).
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Stopping recovery from customers: The government has given strict instructions that banks and merchants cannot under any circumstances pass MDR charges on the pockets of customers. The Indian Banks Association (IBA) has been asked to create a strong grievance redressal mechanism so that if any shopkeeper charges extra from a customer, immediate action is taken.
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Campaign against rumours: IBA will soon launch a nationwide awareness campaign to educate the general public and retail traders about the correct rules.
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Discussion in GST Council: The aspect of 18% GST on MDR may be reviewed in the upcoming GST Council meeting so that it can be removed completely or rationalized.
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Direct communication with traders: The Finance Ministry will soon hold a meeting with major trade and merchant associations so that any confusion or strike-like situation at the ground level can be resolved through talks.