India's Digital Payment Policies Under US Pressure: A Level Playing Field?

At a time when India and the United States are working to finalise their trade deal, the Finance Ministry this week introduced a Bill in Parliament to allow banks and payment system providers to charge fees for UPI and RuPay debit card payments. On the face of it, the two processes may not have a direct link. But the Trump administration has, in fact, consistently pushed most of its trade partners to create a level playing field in their respective digital transaction ecosystems. In India, UPI transactions are increasingly favoured for their convenience and zero transaction cost. With proposed changes, however, banks and payment system providers could charge fees on UPI and RuPay debit card payments, and it could potentially be passed on to customers. Lost business for Visa and Mastercard Since UPI’s launch in 2016, US payments market intermediaries Visa and Mastercard have cited loss of potential business as consumers in India increasingly turned to free UPI payments rather than using cards. The Delhi-based think tank Global Trade Initiative (GTRI) said that the companies object to the “Zero transaction charges for UPI and RuPay, government promotion of RuPay, and RuPay’s early access to credit-card payments through UPI. This has strengthened RuPay and reduced the fee income of US card companies, it said. It said that the two companies operate under a model where banks, payment processors and card networks earn fees from merchant transactions. A widely available, interoperable and zero-Merchant Discount Rate (MDR) platform, such as UPI, limits this revenue pool. An MDR is levied on merchants by banks that process payments to help meet transaction processing, settlement and infrastructure costs. Further, RuPay challenges their position by providing an Indian card network that can be integrated closely with domestic policy objectives, GTRI said. In March, the United States Trade Representative (USTR) had classified India’s digital payment policies “favouring” domestic players as a foreign trade barrier. Such barriers in various sectors are prominent demands under the proposed US-India trade deal. The USTR said that “it has expressed concerns related to the inability of US electronic payment services suppliers to participate in the UPI ecosystem, including credit transactions on UPI on a level playing field with RuPay”. “In November 2020, National Payment Corporation of India (NPCI) announced a market share limitation of 30% (measured by transactions) for third-party app providers initiating online payments made through India’s UPI. While this market share cap for third-party payment apps was originally mandated for January 2023, the NPCI has deferred enforcement, with the current deadline set for December 2026. As of December 31, 2025, two US-owned EPA suppliers together processed more than 80% of all UPI transactions,” USTR said. These suppliers are Walmart-backed PhonePe and Google Pay. India has so far agreed to several US demands as part of the trade deal, particularly in the digital sector. Most prominently, during the last Union Budget , India announced a tax holiday to foreign companies for setting up data centres in the country until 2047, seemingly acting on a key US demand. Last year, the government had abolished the 6% ‘Google tax’ amid tariff pressure as the US said that digital services taxes are against its tech companies — the likes of Apple, Amazon, Google and Facebook. A query emailed to the Finance Ministry remained unanswered till press time. Jairam Ramesh, the Congress party’s General Secretary in-charge of Communications, said in a social media post on Thursday (August 6) that the real reason behind the legal amendment is US pressure. In response, Finance Minister Nirmala Sitharaman said that MDR applies only to merchants and not to end users/customers. She added that the matter has yet to be finalised. “This will happen after the Parliament passes the Taxation and Other Laws (Amendment) Bill, 2026, which propses to amend Section 10A of the Payment and Settlement Systems Act, 2007,” she wrote. Before spreading a canard, @Jairam_Ramesh ji, please consider this: 1. Merchant Discount Rate (MDR) applies only on the merchants and not on the end users/customers. It will support the Banks & Fintech to invest more on infrastructure, innovation & security. All users of UPI… https://t.co/sleUX4ztWe — Nirmala Sitharaman (@nsitharaman) August 6, 2026 Making an example of Brazil India is not the only country whose payments system is under the US’s radar. Last month, it imposed 25% tariffs on Brazil under Section 301 of the US Trade Act of 1974. The provision allows the government to investigate and act against countries whose economic practices are “discriminatory” and “burden” or restrict” US commerce. The action was based on measures of the Brazilian government that supposedly disadvantage American companies. It included the use of the low-cost, instant payment platform known as Pix. “The Central Bank of Brazil created, owns, operates, and regulates Pix, an instant payment platform. U.S. stakeholders have expressed concerns that the Central Bank of Brazil provides preferential treatment to Pix, which disadvantages U.S. electronic payment services suppliers. The Central Bank mandates the use of Pix by financial institutions with more than 500,000 accounts,” USTR said in its report on foreign trade barriers. Brazil’s central bank Banco Central do Brasil (BCB) launched Pix in 2020. It closely resembles UPI, in that it does not require a card or machine and, unlike credit cards, does not charge any annual fee. It also offers rates that are free or lower than other payment options. Pix users can also pay bills, schedule transactions, and withdraw money. The BCB has said that by transferring funds between transactional accounts (demand, savings and prepaid payment), “Pix is a payment method that tends to have a lower acceptance cost because its framework works with few intermediaries. In addition to increasing convenience for users making payments, Pix promotes lower financial costs, increased security and improved customer experience and financial inclusion.” Objections to Indonesia, Vietnam & China USTR has also raised objections against other countries. In its report, the US trade body said that Indonesia’s National Payment Gateway (NPG) requires all domestic retail debit and credit transactions to be processed through switching institutions located in Indonesia. A new agreement is designed to address the issue. “Under the Agreement on Reciprocal Trade, Indonesia has agreed to continue to allow international payment networks provided by U.S. companies to process domestic credit card and electronic commerce transactions on a cross-border basis,” the USTR report said. Indonesia has agreed to refrain from imposing requirements to process data onshore, “provided the country’s authorities have, for regulatory and supervisory purposes, immediate, direct, complete, and ongoing access to the information processed or stored outside Indonesia’s territory,” it added. Further, according to the USTR, regulations in Vietnam require that domestic retail electronic payment transactions be processed through National Payments Corporation of Vietnam (NAPAS) whenever a physical payment card is used at a merchant point of sale. Then there is the Central Bank of Türkiye, which owns and regulates the domestic payments network and has introduced measures that favour its domestic card brand, Troy, while allegedly disadvantaging US electronic payment services suppliers Commenting on the Gulf Cooperation Council (GCC) member states, USTR noted that several GCC countries are developing domestic card brands and introducing regulations that restrict market access for US providers. For instance, the Central Bank of Oman launched a local card system that may prohibit Omani financial institutions from “cobadging” or establishing a dual setup with American providers. The US also objected to Qatar’s announcement that it would discontinue the acceptance of international cards at government outlets starting in February 2025, and the fact that Saudi Arabia’s Saudi Central Bank has mandated the localisation of certain services offered by US payment networks. On China, USTR said that Beijing has maintained market-distorting practices that benefited its national champion, China UnionPay, by granting it exclusive access to domestic currency transactions while delaying the licensing of US electronic payment service suppliers.