New Delhi:
Explaining the decision to impose a charge on some UPI transactions over Rs 2,000, highly placed sources have said the call was a considered one and was taken five years ago. They emphasised that, despite stringent criticism from the Opposition, the move will not be rolled back.
The National Payments Corporation of India (NPCI) announced on Tuesday that while all transactions will remain free for consumers, some UPI payments over Rs 2,000 will attract a Merchant Discount Rate (MDR). The levy will be 0.4% for consumer-to-merchant transactions over Rs 2,000 (which works out to approximately Rs 8 for an amount of Rs 2,001) and a flat rate of Rs 5 for sectors like railways, telecom services, insurance, and fuel.
Person-to-person transactions will continue to be free and small merchants – receiving up to Rs 1 lakh a month via UPI QR codes – will pay no charges on any transactions.
“The new UPI framework introduced has no impact on any person-to-person transactions. UPI will continue to remain completely free for all person-to-person transactions, irrespective of the amount transferred. Payments to merchants up to Rs 2,000, along with transactions covered under the zero-MDR framework for small merchants, will also remain free. Consequently, approximately 96% of all P2M transactions will remain unaffected. MDR will apply only to specified merchant transactions above Rs 2,000,” the finance ministry said in a statement.
“It is clarified that MDR is neither a tax nor a charge collected by the Government or NPCI. It is distributed among payment ecosystem participants, including banks and payment application providers, to support the operation and continued expansion of the UPI ecosystem. Introduced under the Payment and Settlement Systems Act, 2007, following detailed deliberations by the UPI Steering Committee, the framework seeks to ensure the long-term sustainability of UPI while protecting individuals and small merchants from additional charges,” it said.
READ | UPI Charges From October 15: 10 Things Every User Should Know Before Paying Online
Sources said on Wednesday that the decision was taken after careful consideration. “It was decided five years ago that MDR would be levied once the digital infrastructure was established,” a source said.
They pointed out that the charge will apply to only 4% of transactions.
“The general public will not be affected, and this decision will not be reconsidered,” the source asserted.
‘Destroying Savings’
The NPCI’s announcement prompted scathing criticism from the Congress and other Opposition parties, which described the MDR as “anti-people”.
“‘No fees on UPI’ has been changed to ‘no fees on UPI transactions up to Rs 2,000’. Sky-high inflation has already emptied the common person’s pocket. Wholesale inflation is near 10%, and the BJP government has planned to impose a ‘Digital Payments Tax’ on the public, aiming to destroy whatever little savings they have left,” Congress President Mallikarjun Kharge said in a post in Hindi on X on Tuesday.
“Behold the Modi government’s biggest flip-flop: 10 years ago, demonetisation delivered a shock to the country’s economy. When questions were raised about the disastrous outcomes of demonetisation, the government argued that it was imposed to promote digital payments and a cashless economy,” he added.
READ | Opinion: How A Tiny 0.4% UPI Fee Could Change How India Pays
Leader of the Opposition Rahul Gandhi also hit out at Prime Minister Narendra Modi on Wednesday and called for the MDR to be rolled back.
The BJP, however, accused the Congress of spreading lies through a ‘jhooth ki dukaan’.
“Congress is once again spreading fake news. 96% of UPI merchant (P2M) transactions are Rs 2,000 or below, and they are 100% charge-free. RuPay debit-card payments remain charge-free. Consumers pay zero transaction charge. P2P (person-to-person) UPI transactions remain completely free,” BJP Spokesperson Pradeep Bhandari said in a post on X.
“The government has made it absolutely clear: MDR charges will NOT be levied on consumers,” he added.
