The Finance Ministry rejected suggestions that India introduced a Merchant Discount Rate on select Unified Payments Interface transactions under external pressure, saying the move was intended to strengthen competition and expand domestic participation in the digital-payments ecosystem.

The clarification follows references in media reports to the US Trade Representative’s 2026 National Trade Estimate Report, which raised concerns over what it described as unequal access for US electronic-payment suppliers in India.

The USTR report specifically flagged two issues: the inability of US payment-services providers to participate in UPI, including credit transactions, on the same terms as RuPay; and the National Payments Corporation of India’s planned 30% market-share cap for third-party application providers.

The Finance Ministry said the September 15 NPCI circular had not opened credit transactions on UPI to non-RuPay credit cards, arguing that the policy continued to favour RuPay as a domestic payment option.

The ministry also said the MDR framework could help smaller payment companies compete with dominant UPI applications by creating a more sustainable revenue model.

NPCI had announced a 30% market-share cap for third-party UPI apps in November 2020, but implementation was repeatedly deferred. The current deadline is December 2026. The USTR report noted that two US-owned payment applications together processed more than 80% of UPI transactions at the end of 2025.

According to the ministry, the lack of a sustainable revenue model had made it difficult for smaller companies to challenge market leaders. It said MDR on select higher-value merchant transactions was intended to give more participants the commercial incentive to expand their UPI operations.

The government therefore characterised the new pricing regime as a measure aimed at protecting India’s autonomy in electronic payments rather than as a response to US pressure.

Under the framework announced this week, a 0.4% MDR applies to specified person-to-merchant transactions above ₹2,000, while transactions of ₹75,000 and above are capped at ₹300. Small-merchant transactions under the P2PM category remain exempt, and the government says about 96% of merchant transactions will remain outside the MDR regime.

The ministry also reiterated its support for RuPay credit and debit cards and said the continued zero-MDR treatment for RuPay debit-card transactions was part of its effort to maintain a strong domestic alternative.

It called allegations that MDR had been introduced under external influence “false and misleading”.

The government has separately said the new UPI framework is intended to support long-term investment in cybersecurity, fraud prevention and payments infrastructure, while reducing reliance on budgetary subsidies.