5 hrs ago
UPI Charges Debate Grows as MDR Framework Opens Higher Payments
People can still use UPI without a fee on payments up to ₹2,000.
RuPay debit-card payments are also protected from direct or indirect charges.
The government has not announced a fee for customers making larger UPI payments.
A legal change now allows possible processing fees for some merchants.
This does not mean those fees have already started.
The fees, called MDR, would normally be paid by merchants to payment companies or banks.
The government says the money could help pay for technology, security and customer support.
Rahul Gandhi worries that merchants might raise prices to recover any new costs.
UPI payments up to ₹2,000 and RuPay debit-card transactions remain protected from direct or indirect charges.
The government has not announced a consumer fee for UPI payments above ₹2,000.
An amendment to the Payment and Settlement Systems Act allows merchant-level MDR to be considered for selected transactions.
No MDR has formally been introduced, and the UPI & Services Steering Committee would decide whether and how charges are structured.
The government cites digital-payment sustainability, while Rahul Gandhi warns merchants could pass costs to consumers through higher prices.
- Who
- The Ministry of Finance, the Government of India, payment companies, the National Payments Corporation of India, the UPI & Services Steering Committee and Congress leader Rahul Gandhi.
- What
- India has changed the legal framework to allow possible merchant-level MDR on selected higher-value UPI transactions, while keeping specified low-value transactions charge-free.
- Where
- The policy concerns India’s Unified Payments Interface and RuPay debit-card network.
- When
- The clarification followed Finance Minister Nirmala Sitharaman’s August 11 statement; August transaction figures were also cited. No final MDR decision had been made at the time of the clarification.
- Why
- The framework may allow payment-system operators to recover some costs of technology, cybersecurity, fraud prevention, infrastructure and customer support.
Government and Payment Industry Position
Opposition and Consumer-Cost Concerns
Need for MDR
Government and Payment Industry Position
The government and payment companies say the rapidly growing UPI system requires continued spending on technology, cybersecurity, fraud prevention, infrastructure and customer support.
Opposition and Consumer-Cost Concerns
Rahul Gandhi questions the policy and alleges it was influenced by pressure from American companies, while warning that new costs could affect users indirectly.
Who would bear the cost
Government and Payment Industry Position
The government says any direct MDR, if introduced, would be paid by merchants rather than customers, and that everyday low-value payments will remain protected.
Opposition and Consumer-Cost Concerns
Rahul Gandhi argues that merchants could pass MDR-related costs to consumers through higher prices even if customers are not charged directly.
Meaning of the amendment
Government and Payment Industry Position
The government says the amendment is an enabling provision that creates legal flexibility but does not itself impose a tax, transaction fee or MDR.
Opposition and Consumer-Cost Concerns
Critics point out that the amendment removes the earlier restriction on MDR, opening the possibility of future charges on selected higher-value transactions.
Key facts
- Protected transactions
- UPI payments up to ₹2,000 and RuPay debit-card transactions cannot carry charges imposed directly or indirectly on users.
- Higher-value UPI payments
- The government has not announced a consumer fee for UPI payments above ₹2,000.
- MDR status
- No Merchant Discount Rate has formally been introduced for the transactions discussed.
- Legal change
- An amendment to the Payment and Settlement Systems Act, 2007, permits the government to specify payment modes and categories where charges cannot be imposed.
- August UPI volume
- UPI processed 24.51 billion transactions worth ₹29.82 lakh crore in August.
- Potential industry revenue
- Jefferies estimated that fees on larger UPI transactions could potentially generate ₹5,000 crore to ₹10,000 crore annually.
- Decision-making body
- The NPCI-led UPI & Services Steering Committee, comprising 22 members, would determine whether and how MDR is introduced.
Sources
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