The Centre is moving to police the UPI ecosystem. Starting October 15, finance ministry officials will monitor payment aggregators and platforms daily to ensure merchants do not pass the new 0.4% merchant discount rate (MDR) onto consumers for transactions above Rs 2,000. The move follows Tuesday's directive to banks to hold merchants accountable for the fee structure.
Finance ministry officials told reporters that the government does not anticipate a drop in UPI transactions or a surge in cash usage. They argued that the fee will not add a GST burden on merchants, as the tax will be offset through input tax credit. The issue may also figure in next month’s GST Council meeting.
Countering Congress claims that the fee was introduced under US pressure to benefit large platforms, the Department of Financial Services stated the policy aims to enable more domestic players to operate. The department emphasized a clear policy to allow only RuPay credit cards on UPI, making it a preferred choice for Indian users.
An official noted that fully subsidizing the payment system would not ensure innovation. They stated that as a sovereign nation, India must have its own institutions, and some transactions must bear the cost. A dedicated fund will be set up using 5% of the MDR collections to promote UPI usage among small merchants.