- 7 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.
Category
🗞
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 Rs. 100,000, you would be charged at least Rs. 1000 extra.
17:54If you were to use your Visa credit card on that Rs. 100,000 expenditure,
18:00you would be charged at least an additional Rs. 3000,
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.
Comments