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UPI's RuPay Rule: India Defends Payment Sovereignty
17 Sep
Summary
- DFS clarifies no foreign credit cards allowed on UPI for credit transactions.
- Finance Ministry refutes claims of US pressure on UPI MDR.
- NPCI circular aims to create a sustainable revenue for digital payments.
The Department of Financial Services (DFS) issued a clarification on September 15, 2026, addressing observations in the US Trade Representative's 2026 report. This report noted difficulties for US electronic payment providers in participating on a level playing field with RuPay within the UPI ecosystem.
The Finance Ministry firmly dismissed claims that US pressure influenced the decision to implement a 0.4% Merchant Discount Rate (MDR) on certain UPI payments. The ministry stated that the latest NPCI guidelines do not grant any advantage to international credit cards over RuPay on the UPI platform.
According to the DFS, the NPCI circular of September 15, 2026, explicitly permits only RuPay credit cards for credit transactions on UPI. This policy aims to establish RuPay as the preferred credit card choice for users in India, countering allegations of external influence on the MDR introduction.
NPCI's move on September 15, 2026, to introduce MDR on select UPI transactions is intended to foster a sustainable revenue framework for digital payments. This measure is expected to enable smaller companies to compete and expand their operations within the UPI ecosystem, thereby protecting India's payment sovereignty.
Starting October 15, 2026, a 0.4% MDR will be applied to person-to-merchant UPI payments exceeding Rs 2,000, payable by merchants. Essential services, capital markets, and small merchants collecting up to Rs 1 lakh monthly via QR codes will have exemptions or different rates.
