Ahmedabad, September 16 (Daily Kiran) : In Ahmedabad, opposition parties have voiced strong criticism against the central government’s recent decision to implement a 0.4% Merchant Discount Rate (MDR) on Unified Payments Interface (UPI) transactions exceeding ₹2,000, starting October 15. They argue that this policy will impose an undue burden on merchants and potentially lead to higher costs for consumers.
Randeep Singh Surjewala, the Congress in-charge for Gujarat, along with state Congress president Amit Chavda, issued a statement labeling the initiative a “digital U-turn.” They accused the state government of deceiving UPI users with this new framework.
The Aam Aadmi Party (AAP) has also expressed its opposition. Manoj Sorathia, the party’s Gujarat organizational general secretary, referred to the policy as a “royal decree,” warning that AAP may take to the streets if necessary.
This backlash follows the state’s notification and the framework announced by the National Payments Corporation of India (NPCI). Under the new system, a 0.4% MDR will apply to person-to-merchant (P2M) transactions over ₹2,000, with a maximum charge of ₹300 for transactions of ₹75,000 or more. Payments up to ₹2,000 will remain free for merchants, while person-to-person (P2P) transactions will incur no charges regardless of the amount.
The state government has set lower charges for specific sectors, including a flat MDR of ₹5 for transactions exceeding ₹2,000 in railway, telecom, insurance, fuel, and agricultural goods. Capital market transactions will face a 0.02% MDR, capped at ₹300.
Merchants in the small category who earn up to ₹1 lakh monthly through UPI QR codes will continue under a zero-MDR framework. The finance ministry clarified that the MDR is neither a tax collected by the government nor a fee paid by customers. Instead, it is a merchant-side charge shared among payment ecosystem participants, such as banks and payment service providers.
Banks have been advised to ensure that merchants do not pass on the MDR burden to customers. UPI apps are also prohibited from imposing hidden fees for these payments. The state government estimates that about 96% of merchant transactions will remain unaffected.
Sorathia argued that the additional costs would ultimately impact merchants, noting that retail profit margins in the country rarely exceed 5 to 7 percent. He expressed concern that the 0.4% MDR could lead to increased prices for consumers. He questioned the necessity of this charge, pointing out that the NPCI already operates a profitable payment infrastructure.
The Congress party echoed these sentiments, estimating that if 5% of the projected UPI transaction value for 2026-27 falls under the new framework, P2M transactions could incur an annual burden of ₹5,040 crore. They warned that future expansions of rates or categories could significantly increase this burden.
However, the current government framework does not impose a 0.4% charge on all UPI or P2P transactions. The government claims that the new system is designed to provide a sustainable revenue model for the rapidly growing UPI ecosystem while ensuring protection for individuals and small merchants.
Developed by the RBI-regulated NPCI, UPI has become the backbone of India’s retail digital payment system. Congress highlighted that PhonePe and Google Pay hold nearly 80% of the UPI market share by value, making the new MDR framework crucial for payment service providers, banks, and merchants alike. The party also raised concerns about whether the new framework might benefit large foreign-backed payment companies.
Thus, the imminent changes set to take effect on October 15 will apply specifically to certain merchant-side transactions rather than imposing general charges on UPI users.
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