Finance Ministry’s move to introduce a Bill allowing banks and payment system providers to charge fees on UPI and RuPay debit card payments has drawn attention to a less visible but significant dimension: the “Trump factor” in India’s digital payments policy.

While the government has maintained that the amendment is aimed at creating a financially sustainable model for the UPI ecosystem, trade-policy experts have pointed out that the Trump administration has consistently pushed its trade partners to create a “level playing field” in their digital transaction ecosystems.

The United States Trade Representative (USTR), in its March 2026 report on foreign trade barriers, had explicitly flagged India’s zero-Merchant Discount Rate (zero-MDR) policy on UPI and RuPay as a barrier that favours domestic players over foreign suppliers. The representatives feel it creates an uneven competitive environment for US payment giants like Visa and Mastercard.

The timing of the Bill’s introduction has therefore raised questions about whether India’s proposed UPI transaction levy is partly a response to US pressure as part of broader trade negotiations.

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Congress raises US trade kink, warns of future payment charges

Congress leader Jairam Ramesh took to social media platform X to criticise the move, alleging that the government’s argument that MDR is necessary to make UPI financially sustainable is “entirely wrong” and that the burden of any future charges would eventually fall on common users. The party has questioned whether Prime Minister Narendra Modi is seeking to dilute UPI and open the digital payments sector to US businesses, linking the amendment to a US report on digital trade.

In a response to Jairam Ramesh, finance minister Nirmala Sitharaman countered, “It (MDR on UPI) will support the Banks & Fintech to invest more on infrastructure, innovation & security. All users of UPI will reap the benefits of this investment.”

She went on to add that, MDR applies only to merchants and not end users/customers.

“The UPI and Services Steering Committee headed by NPCI is yet to decide on the MDR,” she noted.

However, think tanks like the Global Trade Research Initiative (GTRI) have cautioned that India should not compromise its digital public infrastructure to accommodate US trade demands.

Ajay Srivastava, founder of GTRI, warned that introducing MDR simply to address US complaints or protect the profits of Visa, Mastercard and other foreign payment companies would be a strategic error.

“India should not introduce MDR simply to address US trade complaints or protect the profits of Visa, Mastercard and other foreign payment companies,” he said, emphasising that UPI’s zero-cost model has been a key driver of India’s fintech revolution and financial inclusion.

As the debate unfolds, the challenge will be to balance the need for a sustainable revenue model for the UPI ecosystem with the imperative of preserving its affordability, accessibility and strategic autonomy in the face of external pressures.

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What is MDR and why it matters?

Merchant Discount Rate (MDR) is a fee charged to merchants by banks and payment service providers for processing digital transactions. It is meant to cover the costs of maintaining payment infrastructure, cybersecurity, compliance and innovation. In 2020, the government waived MDR on UPI and RuPay debit card transactions to encourage digital payments, especially in the wake of the pandemic.

Under the new amendment, the government will have the legal authority to notify which electronic payment modes or transactions may attract MDR in the future. The Bill does not impose any specific charges but empowers the Centre to modify the existing zero-MDR framework through subsequent notifications.

Some media reports suggest that the government may allow an MDR of 0.25 per cent to 0.5 per cent on UPI transactions above Rs 2,000 made to businesses, while person-to-person (P2P) payments are unlikely to be affected. The proposal aims to ensure the financial sustainability of the UPI ecosystem, which has grown exponentially in recent years.

What political parties are opposing?

The Congress has been the most vocal in opposing the amendment. It argues that MDR removes the legal protection that has ensured zero MDR on UPI and RuPay transactions. The party contends that this could open the door for banks and payment service providers to levy fees on merchants, which may eventually be passed on to consumers in the form of higher prices.

During the passage of the Bill in the Lok Sabha, opposition members raised strong protests, demanding discussion on unrelated issues such as police action against protestors on July 20. Despite the uproar, the Bill was approved by voice vote without detailed debate on the MDR provisions. Other opposition parties have also expressed concern that the amendment could undermine the affordability and accessibility of digital payments, particularly for small merchants and MSMEs who have been the biggest adopters of UPI.

The Congress has framed the issue as a potential threat to India’s digital public infrastructure, questioning whether the government is succumbing to external pressure to introduce fees on a system that has become a cornerstone of India’s fintech ecosystem.