- 9 minutes ago
A revised merchant discount rate framework will apply to select Unified Payments Interface merchant transactions above 2,000 rupees starting 15 October, while person-to-person transfers and payments under the threshold remain free. High-value transactions will attract an MDR of 0.4% capped at 300 rupees per transaction, alongside flat rates for specific sectors like fuel and railways. The announcement has triggered sharp political disagreement, with the Congress labeling the charge a burden on digital payments and questioning its timing during the festive season. The Bharatiya Janata Party defended the policy, clarifying that 96% of small-ticket transactions remain completely unaffected and free for everyday users. Economists and analysts debate whether businesses will absorb the cost or pass it on to consumers, alongside discussions on digital infrastructure funding.
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NewsTranscript
00:01Good evening, you're watching NewsTrack with me, Maria Shaquille.
00:04For millions of Indians, UPI has seamlessly woven itself into everyday life.
00:10A QR code at a shop, a tap on the phone, and the payment is done.
00:15That familiar no-fee UPI story is changing, at least on the merchant side.
00:21From October 15th, a revised Merchant Discount Rate, or MDR, will kick in
00:26for select UPI payments above Rs. 2,000. You and I will still pay nothing directly.
00:32We will not be paying, as long as the payment is below Rs. 2,000 threshold.
00:38But merchants will have to bear a processing charge on certain transactions,
00:44raising a bigger question, will businesses absorb the cost,
00:47or will it eventually find its way into the prices consumers pay?
00:52Today, UPI may still be free to use, but is the free ride really free?
00:59Here's a report.
01:06UPI payments have been free for consumers for years.
01:11Simple, fast, and with no extra charge for the person making the payment.
01:16But it is no longer free. Why?
01:20Behind every UPI payment is a network of banks, payment apps, and service providers,
01:27and running that network costs money.
01:30For years, much of that cost has been absorbed by the ecosystem,
01:35with government incentives also supporting the system.
01:39Now, from October 15th, a revised MDR framework kicks in for select UPI merchant payments.
01:47And the key point is this.
01:49UPI remains free for consumers.
01:53There is no charge on the pair,
01:55but there is no clarity on whether merchants would pass on their additional burden to consumers.
02:02So what changes?
02:04MDR or Merchant Discount Rate is the processing charge paid by the merchant
02:09when a digital payment is accepted.
02:14It does not mean the person making the payment will be charged.
02:19All UPI payments to merchants up to 2,000 rupees will remain MDR free.
02:25But for transactions above 2,000 rupees, MDR will now apply in select categories.
02:32In sectors such as railways and fuel,
02:36the MDR will be a flat 5 rupee per transaction above 2,000 rupees.
02:41For other high-value merchant transactions, the rate will be 0.4%,
02:46capped at 300 rupees per transaction.
02:51Simply explained, if you send 5,000 rupees to a friend, there is no MDR.
02:57But if you pay a merchant 5,000 for a purchase,
03:01the merchant could attract the applicable MDR.
03:04The important distinction is the charge on the merchant side, not the consumer side.
03:10The government says a dedicated fund will also be created
03:13to upgrade digital payment infrastructure for small vendors and Tier 3 markets.
03:20Because UPI has grown at an extraordinary pace.
03:24In 2025-26, it processed more than 24,000 crore transactions worth around 314 lakh crore.
03:33And as volumes grow, so do the cost of cyber security,
03:37fraud prevention and the infrastructure needed to keep the system running.
03:43Viera Report, India Today.
03:51And as expected, the new UPI rule has triggered a political firestorm
03:56with both the centre and opposition trading sharp barbs over the digital payments landscape.
04:02Let's listen in to who said what.
04:14The UPI notification has become the latest flashpoint
04:18between the Narendra Modi government and the opposition.
04:25The move has drawn sharp criticism from the Congress Party,
04:29which has dubbed the 0.4% MDR on UPI transactions above 2,000 rupees, the Modi tax.
04:37The party says the Prime Minister popularised UPI
04:41and sought credit for building a cashless economy,
04:44but now is effectively taxing people for using it.
04:49Leader of opposition Rahul Gandhi has once again accused the Prime Minister
04:54of being compromised, alleging that he is surrendering to US pressure.
05:25The BGP has hit back, calling the Congress.
05:28A Jhoot ke Dukaan and accusing it of spreading fake news over possible charges on UPI transactions.
05:59The BGP maintains that person-to-person UPI transactions continue to be
06:04free.
06:05The message from the government is clear.
06:08Aam Aadmi will not be burdened.
06:10But how pocket-friendly will UPI remain, only time will tell.
06:15Bureau Report, India Today.
06:20So the Aam Aadmi, you and me, will not be burdened is the big takeaway here.
06:25But as expected, politics is playing out on this issue.
06:30Let's bring in the politicians on the programme tonight.
06:33Sanju Verma, National Spokesperson of the BGP, is joining me.
06:36Vrijesh Kalappa, National Spokesperson of the Congress, is on the show.
06:39And we also have Dipanshu Mohan, Professor and Dean, Jindal Global University, and also
06:44visiting professor at LSE and Oxford.
06:47Ms. Sanju Verma, let me begin with you.
06:49Why was the country told that UPI will stay free if a merchant fee was already being designed?
06:55You know, let's get one thing very clear.
06:58UPI has been in existence for barely 10 years.
07:01It came about in 2016.
07:04And at the very outset, the National Payments Corporation of India, the NPTI, and the RBI,
07:10if you read the guidelines, UPI was set up to ensure that the micro-payments and small-payments system
07:19is not compromised.
07:21People who are small traders, small businessmen, individuals who transact, you know, maybe on
07:28a daily basis for 30 rupees, 300 rupees, 500 rupees, these are the kind of people who
07:33can transact online.
07:36They can transact digitally without having to own a visa or a MasterCard.
07:42The limiting point is simply this.
07:44And I want to say this on your show with no ifs or buts.
07:48I did not hope that my punches.
07:51Ashneel Grover and the entire cabal that is rooted, you know, in deception and is rooted
07:58for the likes of Ashneel Grover.
08:00They say, are they having a surplus of two and a half lakh crores?
08:05It gave the government dividend of more than two lakh crores.
08:07Then what is the need for ensuring that there is an MDR levy of 0.4%?
08:12So very quickly, point number one, P2P, person to person, peer to peer, people to people,
08:19your transaction is completely free, irrespective of whether you are transacting for 2,000 rupees
08:24or 2 lakh rupees.
08:25The, you know, big controversy has come around because now the government says that there
08:30is 0.4% levy on transaction above rupees 2,000.
08:35But please understand, Maria, even if you transact beyond rupees 2,000 and it's a person to merchant
08:43transaction, in that case, the fees per transaction is capped at 300 rupees.
08:52So assume I've done a transaction of 1 lakh rupees, a P2N transaction.
08:57At 0.4%, I would need to pay 400 rupees.
09:02But the government says it is capped at 300 rupees.
09:06Now imagine you do a 1 lakh transaction via visa, visa debit card.
09:12The debit card charges are 1.5% in the lease, which means if I do a 1 lakh transaction
09:18via
09:19a visa debit card, I'll have to pay at least 1,500 rupees.
09:23And if I do a transaction of 1 lakh rupees via visa credit card, I may have to pay 3
09:29to
09:294%.
09:303% means on that 1 lakh transaction, I will have to pay 3,000 rupees additionally.
09:35Okay.
09:36A 4% fee...
09:37That's very well explained, Ms. Varma.
09:39Let me bring in Brijes Kalappa now.
09:41Person to person is free.
09:44Under 2,000 is free.
09:47Small QR merchants under 1 lakh rupees a month are free.
09:53Then Brijes Kalappa, where is the tax on the arm, Admi, in this text?
10:02See, Maria, supposing I were to go to a shop and I were to transact business with the shopkeeper.
10:08Shopkeeper himself has UPI, right?
10:11And he runs a small Kirana shop and I'm buying goods beyond 2,000 rupees.
10:19So what would he say, Maria?
10:21He would say, okay, put it to my personal account.
10:23So first thing is, you're encouraging dishonesty when you have levied such a huge kind of charges
10:34in regard to this, in regard to UPI, which was never in the first place contemplated.
10:40So the first thing is, you're infusing a sense of dishonesty.
10:45The very purpose of having UPI was to cleanse the system to make it more transparent, right?
10:52What are you doing?
10:53You're infusing dishonesty to the entire system because otherwise, supposing he says that
10:58you send it to my shop's account, then the 2,000 rupees is chargeable.
11:03Therefore, he will say, put it on my personal account.
11:06So this is the first aspect.
11:07And this happens across the board, right?
11:09First part.
11:10Second part is, we are now speaking of a 7.8% GDP growth.
11:17On the one hand, we are doing phenomenally well, right?
11:22On the other hand, share markets are falling.
11:24We are supposed to be the worst share market in the entire, you know, in Asia.
11:30Now, given this scenario, Prime Minister comes out and says, don't buy gold.
11:37He says, on the second part, he says, don't travel abroad.
11:42If you're doing so phenomenally well, right?
11:45Why are all these restrictions have been placed?
11:48One.
11:49Two.
11:49And what is this chindi chori?
11:51On, first, you bring about UPI.
11:55You make it something which is laudable, which is extraordinarily good for the people.
11:59You know, you cleanse the system of, you know, the cash part.
12:04You have, first you have your demonetization, then you bring UPI.
12:08So, that you strike against the rule of black money.
12:16I am going to come back to you.
12:18Sanjeev Anmah, I'll make you respond to this.
12:20I'll make you respond to this.
12:24But before that, let me bring in Dipanshu Mohan.
12:27I want to understand.
12:28Sir, you have made your point.
12:30You have made your point.
12:31Because you have made a couple of points and that need clarification.
12:34Perhaps Professor Dipanshu Mohan will be able to explain this to us better.
12:39You heard what the Congress Party's argument is.
12:42That if the larger idea of UPI was to ensure that, you know, the demonetization was brought in,
12:52the corruption had to be done away with, direct payment transfer was the big idea.
12:57Of course, the country's payment system has been lauded by one and all.
13:03And I'm, you know, as an Indian, I'm extremely proud of the fact that we pay to every Kirana store,
13:10every Thelawala that we meet now.
13:12So, that is what we are looking at.
13:13But if the government looks at, you know, a very, very minimal, nominal amount of this nature,
13:23is the criticism justified?
13:26Okay, so, thanks a lot for having me here, Maria.
13:29Just, I think let's put a couple of things in perspective here.
13:34First of all, with the imposition of this charge that the government has sort of notified,
13:41UPI no longer exists as a digital public good.
13:44This is important because a lot of transitional changes in payment systems have happened.
13:52A lot of people, especially the urban middle class and upper middle class,
13:57had stopped using cash-based wallet systems.
14:00People are likely to come back to that.
14:03Cash will be back as a larger preferred mode of payment for larger denominations.
14:08To me, the logic of imposition of this tax is, from an economic standpoint, counterintuitive
14:15because most of the merchants who know now that over $2,000, you have to charge a particular fee
14:24would ask for payments to be made either in multiple denominations of less than $2,000,
14:31which imposes a higher operational cost on the system.
14:37And I think that has to be understood because a lot of the conversation that has been happening
14:42throughout the day is that, oh, the operational dynamics of having a digital public infrastructure
14:48requires money, we need that money to be funded, so this charge is justified.
14:53So that cost of the operational dynamics of the system will be under more stress.
14:58People will make more 90-90 denomination payments, and that's where things get counterintuitive.
15:04The other thing is, this is a consumption tax, which means that it will affect, as an indirect payment,
15:11the low-income groups in the worst possible way.
15:14For the simple reason, MSMEs or any enterprise which otherwise was very happy,
15:20in fact, much of our informal sector right now, even a woman who's selling or taking arms as a beggar
15:28is accepting UPI payments in cities, there is an enormous reliance on this system,
15:35which I think made some cadre-based economic bureaucrat to advocate that because of the payment overload,
15:45it is okay to expand the tax base.
15:47And my sense is, as a tax, every tax system has basic affirmative principles.
15:54There is some principle of equity, fairness, simplicity, neutrality.
15:58This belies all of these logics.
16:01They're more anti-canons.
16:02And the only logic I can see soundly that can be justified imposing a charge
16:07is that the government is fiscally right now in a struggle spot.
16:11The timing of this is very revealing because we are sort of halfway through the budget year.
16:18The peak of the consumption cycle is the festive season.
16:23So the timing of the imposition of this charge is 15th October onwards.
16:27So that is when the consumption payments are at the highest peak in the whole year.
16:31And as a result of that, you would expect the government wants to maximize revenue
16:36because a lot of its other subsidies are going very high.
16:40Fuel subsidies and fertilizer subsidies because of the restoration crisis
16:43and oil prices have gone up.
16:47Let's bring in Sanju Varma now.
16:50Please, Sanju Varma, go ahead.
16:52You know, I'm appalled.
16:53I'm appalled to see that somebody as educated as Dipanshu Mohan
16:57is sitting here and has the audacity to say
17:01that UPI is not public goods.
17:04Point number one.
17:0496% of UPI transactions are below the Rs. 2000 category,
17:11which is completely free.
17:12So is it a free public good?
17:14Yes.
17:1586% of UPI transactions are for transactions below Rs. 500.
17:21So does it help small tirahawani and your maid or, you know,
17:27a small-time vendor?
17:28Oh, yes.
17:29Does that make UPI a public good, which is completely free?
17:33Yes.
17:33It is only 4% of the transactions which are in the over Rs. 2000 category.
17:39And again, very quickly, Mr. Dipanshu Mohan, do you have a visa card?
17:45If you were to spend 1 lakh rupees on your visa debit card,
17:50you would be charged at least 1,000 rupees extra.
17:54If you were to use your visa credit card on that 1 lakh rupees expenditure,
18:00you would be charged at least an additional 3,000 rupees,
18:04assuming the credit card charges are 3%.
18:07Now in UPI, suppose I make a transaction with a merchant for 3,000 rupees, the MDR merchant
18:16discount rate is 0.4%, which means I will have to pay the merchant an additional 12 rupees.
18:24Suppose I do a transaction with a merchant using my UPI for 4,000 rupees, I will have
18:30to pay in absolute terms an MDR of 1,616 rupees, assuming 0.4% at the MDR rate.
18:38If the transaction is worth 5,000 rupees with a merchant, I will have to pay only 20 rupees
18:44additional, assuming a 0.4% MDR.
18:48So you are saying by paying 20 rupees more, I am harming a small vendor.
18:55In which world are you living in?
18:56And by the way, let me tell you, if you use a rupee debit card, which rides on UPI, you
19:04pay 0 MDR.
19:06If you use a rupee credit card, which also rides on UPI, you end up paying almost next to nothing.
19:15You don't want to use UPI, you don't want to use rupee debit card, you don't want to use
19:21a rupee credit card, where you end up paying nothing by way of MDR, but you want to use
19:27Visa and MasterCard, you're shelling 3% to 4% over and above what your actual payment
19:33outgo is.
19:34You've never complained about Visa, you've never complained about MasterCard.
19:39So this is hypocrisy at its worst.
19:40And my final point is this.
19:42There are four charges, your customers, your clients, your audience, everybody needs to
19:48hear this, Maria.
19:49When we use a debit card or a credit card, you pay one thing called the banking charge.
19:55You pay a second thing called the merchant discount rate.
19:59There's a third payment which you make, which is called the processing fees.
20:04And there is a fourth payment which you make, which is called the network assessment fees.
20:10But when you use UPI, by and large for 96% of the transactions, you don't pay a banking
20:16charge, you don't pay an MDR charge, you don't pay a processing fee, and you don't pay a network
20:22assessment fee.
20:23I'll bring in British Kalappa, Ms. Verma.
20:26Because one of the points that has been made repeatedly by the Congress Party is surrender
20:30to the U.S.
20:31help us understand, which American demand does 0.4% on an Indian mall bill really satisfy?
20:42First is, Maria, I don't think it's appropriate for any spokesperson belonging to any political
20:48party to come down on a neutral person who comes on a debate and speaks his mind.
20:55I don't think it's, you know, correct.
20:56It's not, I don't know, I don't know him, I don't know him at all.
21:01I've never met him.
21:02But it's, you know, we have never done that.
21:06If that, that's the BJP style, it's all right.
21:09Please, let him speak.
21:11Sanjay Verma, let him speak, please.
21:13Yes, go ahead.
21:17Second part is, Maria, what the BJP spokesperson spoke about comparing UPI to a credit card and
21:27said, if you use your visa card, if you use your master card, when you approach the bank
21:35for a, one minute, madam, if you, is she going to continue to interrupt?
21:43Maria, is she going to continue to interrupt?
21:45But then, I think she should have her say.
21:47She can come as a government spokesperson and then, you know, fill the television with all
21:51whatever she wants to say.
21:53What's the point of having all of us?
21:55Go ahead.
21:56Yeah, so the point is that when you enroll for a card, you know clearly that these are
22:03the terms of the card, right?
22:05You know clearly that when you go for a visa card, you go for a master card, and this is
22:10not something which is, you know, crept on to you.
22:14This is not something which is stealthily, you know, pushed on to you.
22:18You knew for a fact that when you enroll for a card, these were going to be the charges.
22:24Today, to compare UPI, which was absolutely free, first, you, you wean people into the
22:31UPI, then you make it that look, you guys have to pay for this.
22:36This is just like you're, you know, having a charge for your, for maintaining a bank account.
22:41Yes, but, but the government is done exactly this, and this is why the consumer feels.
22:46Dipanshu had, had some concerns there.
22:50Dipanshu, if you look at the numbers, 96% of the transactions stay free.
22:56A large share of value will now carry 0.4%.
22:59Then what really is the concern?
23:02No, so I don't know where the 96% number, because if you look at the volume of transactions,
23:09a lot of the payments that are being made by share volume are much more.
23:14Clearly, it is likely that a lot of the large payments that UPI was being used for are no
23:19longer going to be made that easily without a charge.
23:22And it's fine.
23:22I mean, see, that's, it's completely okay to have a taxation system introduced and say,
23:28let's call what it is.
23:29It's a consumption tax.
23:30Like you have, you were using a credit card, you were using a debit card.
23:33Now you have to use UPI.
23:35But what was the rationale of bringing UPI in?
23:37You wanted a sort of an ease of payment standard.
23:41You wanted to move away from cash, which is what all the justification was of financial
23:47inclusion.
23:47All of that worked.
23:49This is almost a geo data model.
23:51Get, get everything for free, get all subscriber data.
23:54And as much as now then move to charging people for per unit cost.
23:59And I cannot, for the reason of anything, understand what is the rationale unless and until if there
24:05was any cost that the government was incurring, it wants to cross subsidize that, number one.
24:10Number two, there was a heavy merchant or commercial bank interest lobby, which has pushed for
24:15this.
24:15I mean, there is, that could be the only other reason.
24:18We don't know.
24:18I mean, there's a government notification.
24:20Just, just, just, just, sorry, one, one, one point.
24:22One, one, one more point.
24:24The other thing you have to put in perspective is as per the aggregate tax revenue that India
24:29collects, the government collects, direct tax accounts for less than 40%.
24:33All of our tax revenue is indirect tax driven.
24:37If the government has so much of concern of its fiscal capacity, why not tax, wealth tax?
24:44Okay.
24:44I have just enough time for Sanjeev Verma's last word.
24:47Please go ahead, Sanjeev Verma.
24:49You know, I would like to educate Mr. Dipanshu Mohan.
24:52UPI is the world's largest digital payment interface.
24:56And it is not a consumption tax.
24:58I think you need to go and relearn.
25:00And you've got economics as well.
25:02So please don't sit here and, you know, speak rhetoric, speak hot facts.
25:07I fail to understand, Mariya, if 4% of these digital transactions via UPI are going to be
25:15taxed, and that too there is a cap of 300 rupees per transaction, why the big bhala baloo?
25:23This is like storm in a teacup.
25:25It is like saying that, oh, you know, GST can work when they rent in for two slams.
25:305% and 18% people say, oh, the seller will finally push the GST burden to the consumer, but
25:38that did not happen.
25:39And my final point is this, 55 crore people in India use UPI.
25:46There have not even been 5 complaints.
25:495.5 crore merchants use UPI.
25:52There have not even been 5.5 complaints.
25:56741 lines back use UPI.
25:59They have not complained.
26:005.050% of global financial transactions happen via UPI.
26:06From Emmanuel Macron to the crown prince of UAE to the Singapore head of government,
26:13they lauded UPI as the world's biggest innovation in terms of digital public infrastructure.
26:20But Dipanshu Mohan says, UPI, the 0.4% MDR, is a consumption tax which the government wants to use
26:30for cross-subsidizing its welfare program.
26:34Mr. Dipanshu Mohan, please say your anti-establishment, but please don't stop using your common sense because UPI…
26:43We have really come to the end of this discussion now.
26:46Sanju Verma, I appreciate your time.
26:48Thank you for joining us.
26:49Thank you to Bridges Kalapa for his time and also to Professor Dipanshu Mohan for this conversation.
26:55That's all from me.
26:55Thanks so much for watching.
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