In response to opposition calls to reverse the 0.4 per cent Merchant Discount Rate (MDR) on certain UPI transactions, government sources said on Thursday that the decision had been taken after careful evaluation. The government will closely monitor its implementation to prevent merchants from passing on the costs to customers.“Steps will be taken to address gaps in enforcement. The government has engaged in talks with payment aggregators. It will closely monitor implementation to ensure that merchants do not pass on the costs to consumers,” sources said.According to the sources, the decision to impose a 0.02 per cent MDR on stock market transactions was taken after consultations with SEBI, stock exchanges and other stakeholders.The sources confirmed that the government was under no pressure to impose a 0.4 per cent MDR on certain UPI transactions. They also dismissed claims regarding the imposition of Goods and Services Tax (GST) on UPI transactions as false rumours.“The GST will be deducted from the input tax credit. The GST Council will address any issues that arise. We are not witnessing a significant rise in cash transactions due to MDR. We are confident that cash transactions will not increase. We do not anticipate a decline in UPI transactions after the new charges come into effect on October 15,” the sources said.The National Payments Corporation of India (NPCI), which operates the UPI platform, issued a notice on September 15 outlining MDR charges for specific UPI transactions, with the aim of establishing a sustainable revenue model for the digital payments ecosystem.Sources said the NPCI had been consistently advocating for RuPay debit cards, whose usage remains exempt from MDR.“RuPay cards will have an advantage over other cards,” they said.Starting October 15, a 0.4 per cent MDR will apply to person-to-merchant UPI transactions exceeding Rs 2,000. Merchants, rather than consumers, will bear the fee, which will be capped at Rs 300 for transactions of Rs 75,000 or more.Person-to-person transactions and most everyday merchant transactions will remain free. Core services—including railways, telecommunications, fuel and insurance—will attract a uniform charge of Rs 5 per transaction exceeding Rs 2,000.Transactions in the capital markets, including mutual funds and stockbroking, will be subject to a lower MDR of 0.02 per cent, also capped at Rs 300.Small vendors earning up to Rs 1 lakh a month through UPI QR codes will be entirely exempt from additional charges. According to officials, the exemption covers nearly 96 per cent of all merchant transactions.