Overview
The Indian National Congress on 17 September 2026 accused the Modi government of misusing the proceedings of a Parliamentary Standing Committee to defend its decision to impose a Merchant Discount Rate (MDR) on high‑value UPI transactions. The opposition says the specific proposal was never placed before, nor endorsed by, the committee.
Key Developments
- Congress leaders Jairam Ramesh and Manish Tewari labelled the government’s move as a “pathetic attempt” to divert attention from public backlash.
- The government cited earlier deliberations of the Finance Committee and the presence of Congress MPs when a report was adopted, but the committee never discussed the new MDR proposal.
- Congress deputy leader Gaurav Gogoi emphasized that the Department of Finance had no specific UPI tax proposal during its meeting with the committee.
- The MDR of 0.4% applies to UPI transactions above ₹2,000 from 15 October 2026, raising concerns about its impact on small merchants.
Important Facts
The MDR is a fee levied on merchants, not on consumers, for each digital transaction. The government argues the charge will align Indian payment fees with international norms and address concerns of foreign payment‑app providers. Critics contend that the fee will increase costs for small traders, while large foreign entities, especially U.S. firms, could benefit from higher transaction volumes on their platforms.
Exam Relevance
Understanding this episode helps aspirants in:
- GS2 (Polity): Role and limits of parliamentary committees, executive‑legislative relations, and opposition strategies.
- GS3 (Economy): Structure of digital payment systems, impact of transaction fees on micro‑enterprises, and regulatory challenges in a liberalised financial sector.
- GS4 (Ethics): Ethical considerations of policy framing, transparency in parliamentary proceedings, and accountability of the executive.
Way Forward
Congress has demanded a complete withdrawal of the MDR, arguing it harms small merchants and favours foreign corporations. The government may need to:
- Provide a detailed justification and cost‑benefit analysis of the MDR.
- Engage with the RBI to assess the fee’s impact on financial inclusion.
- Consider a tiered fee structure or exemptions for low‑turnover merchants.
Future parliamentary scrutiny, especially by the Finance Committee, will be crucial to determine whether the MDR can be modified or repealed.