UPSC Prelims Practice Questions — PM decided to prostrate before Trump, says Rahul on UPI fee

Q1. Consider the following statements regarding the zero-Merchant Discount Rate (zero-MDR) regime for UPI in India: 1. MDR on BHIM-UPI and RuPay debit card transactions was made zero with effect from January 2020 to promote digital payments. 2. The zero-MDR regime was given effect through amendments to the Payment and Settlement Systems Act, 2007 and the Income-tax Act, 1961. 3. Immediately before the zero-MDR regime, NPCI permitted MDR of up to 0.90% of transaction value on UPI person-to-merchant transactions. 4. Under the Cabinet-approved incentive scheme, low-value BHIM-UPI (P2M) transactions up to ₹2,000 are eligible for an incentive of 0.15% of transaction value. Which of the above is/are NOT correct?

  1. MDR on BHIM-UPI and RuPay debit card transactions was made zero with effect from January 2020 to promote digital payments.
  2. The zero-MDR regime was given effect through amendments to the Payment and Settlement Systems Act, 2007 and the Income-tax Act, 1961.
  3. Immediately before the zero-MDR regime, NPCI permitted MDR of up to 0.90% of transaction value on UPI person-to-merchant transactions.
  4. Under the Cabinet-approved incentive scheme, low-value BHIM-UPI (P2M) transactions up to ₹2,000 are eligible for an incentive of 0.15% of transaction value.
  • A. 1 and 3
  • B. 3 only
  • C. 2 and 4
  • D. 3 and 4

Q2. Under the Government's incentive scheme for promotion of low-value BHIM-UPI (P2M) transactions, the incentive amount is paid by the Government in the first instance to which one of the following stakeholders, which then shares it with the others?

  • A. The acquiring bank, that is, the bank of the merchant receiving the payment
  • B. The issuing bank, that is, the bank holding the paying customer's account
  • C. The payment service provider bank that onboards the payer's UPI application
  • D. The third-party application provider offering the UPI app to the payer

Q3. The Government of India's policy on merchant charges for UPI, including the zero-MDR regime and its 2026 revision, is administered by which one of the following?

  • A. The Department of Revenue in the Ministry of Finance
  • B. The Department of Financial Services in the Ministry of Finance
  • C. The Department of Economic Affairs in the Ministry of Finance
  • D. The Ministry of Electronics and Information Technology

Q4. In the UPI merchant-charge framework effective from 15 October 2026, the 'P2PM' category refers to which one of the following?

  • A. Small merchants receiving up to ₹1 lakh a month through UPI QR codes, who continue to get zero MDR
  • B. Peer-to-peer transfers between two individuals, on which no charge has ever been levied
  • C. Merchant payments above ₹2,000 that attract 0.4% MDR capped at ₹300 per transaction
  • D. Payments routed from a prepaid wallet to a merchant account through an interoperable QR code

Q5. Of the 40 basis points of MDR levied on an eligible UPI person-to-merchant transaction, how many basis points are passed on by the acquiring bank to the customer's issuing bank as interchange?

  • A. 4 basis points
  • B. 8 basis points
  • C. 20 basis points
  • D. 28 basis points

Q6. Zero MDR on BHIM-UPI and RuPay debit card transactions was operationalised in 2020 partly through an amendment to which one of the following provisions of the Income-tax Act, 1961?

  • A. Section 269ST
  • B. Section 269SU
  • C. Section 271DB
  • D. Section 194N

Q7. Consider the following statements comparing the National Payments Corporation of India (NPCI) with other entities in India's payments landscape: 1. NPCI was set up as an umbrella organisation for retail payment systems, whereas large-value settlement through RTGS continues to be owned and operated by the Reserve Bank of India. 2. NPCI was incorporated as a not-for-profit company under Section 25 of the Companies Act, 1956, unlike the international card networks with which RuPay competes, which are for-profit entities. 3. NPCI was promoted by the Reserve Bank of India jointly with the Securities and Exchange Board of India, and its core promoter group consists exclusively of public sector banks. Which of the statements given above is/are correct?

  1. NPCI was set up as an umbrella organisation for retail payment systems, whereas large-value settlement through RTGS continues to be owned and operated by the Reserve Bank of India.
  2. NPCI was incorporated as a not-for-profit company under Section 25 of the Companies Act, 1956, unlike the international card networks with which RuPay competes, which are for-profit entities.
  3. NPCI was promoted by the Reserve Bank of India jointly with the Securities and Exchange Board of India, and its core promoter group consists exclusively of public sector banks.
  • A. 1 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q8. In 2026, the United States formally listed India's zero-MDR UPI regime and the preferential position of RuPay among foreign trade barriers. This listing appeared in which one of the following instruments of the Office of the United States Trade Representative?

  • A. The annual National Trade Estimate Report on Foreign Trade Barriers
  • B. The annual Special 301 Report on intellectual property protection
  • C. The determination concluding a Section 232 national security investigation
  • D. The biennial Report to Congress on China's WTO Compliance

Q9. One of the objections raised by the USTR in 2026 concerned NPCI's proposed '30 per cent market-share cap'. This cap refers to a ceiling on which one of the following?

  • A. The share of total UPI transaction volume that any single third-party application provider may process
  • B. The share of Indian card issuance that any single foreign card network may account for
  • C. The share of merchant acquiring business that any one public sector bank may hold
  • D. The share of foreign equity permitted in a payment system operator authorised in India

Q10. In September 2026, the leader holding the highest office in the Indian National Congress organisation — its national President — attacked the UPI merchant-charge decision as a 'surrender' that showed the Government's 'meekness'. Who was this leader?

  • A. Mallikarjun Kharge
  • B. Rahul Gandhi
  • C. Jairam Ramesh
  • D. K. C. Venugopal

Q11. In India's UPI architecture, the term 'Third-Party Application Provider (TPAP)' denotes which one of the following?

  • A. A non-bank entity offering a UPI payment app to end users through a sponsor bank's UPI handle
  • B. A bank that holds the customer's account and authorises debits against it for UPI payments
  • C. An entity that aggregates merchants and settles their receipts into their current accounts
  • D. A technology vendor that supplies the core switching infrastructure on which UPI is run