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By:

Sachin Udgirkar

14 April 2025 at 7:02:53 pm

UPI Stays Free — But the Rules Behind It Are Shifting

The real question is whether the cost stays confined to the merchant side or finds its way into prices. For a decade, UPI has run on one promise: instant, free and frictionless. That promise is now being tested. Parliament has cleared the legal path for a Merchant Discount Rate (MDR) on UPI transactions. Untangling what this actually means matters more than the headlines around it. The Taxation and Other Laws (Amendment) Bill, 2026, passed by both Houses this month, amends Section 10A of the...

UPI Stays Free — But the Rules Behind It Are Shifting

The real question is whether the cost stays confined to the merchant side or finds its way into prices. For a decade, UPI has run on one promise: instant, free and frictionless. That promise is now being tested. Parliament has cleared the legal path for a Merchant Discount Rate (MDR) on UPI transactions. Untangling what this actually means matters more than the headlines around it. The Taxation and Other Laws (Amendment) Bill, 2026, passed by both Houses this month, amends Section 10A of the Payment and Settlement Systems Act, 2007. It is, by the government's own description, an enabling provision — it does not impose any charge itself. It creates a mechanism through which the NPCI-headed UPI and Services Steering Committee can later decide whether an MDR should apply and to what. No such decision has been finalised. Consumers, including all peer-to-peer transfers and the vast majority of merchant payments, remain untouched. Any future MDR is expected to target a narrow band: merchants above roughly Rs 1-1.5 crore annual turnover, on transactions above Rs 2,000, at 0.05-0.07 per cent — a fraction of the 1.8 per cent long charged on card payments. The framework is structured to leave close to 90 per cent of UPI-accepting merchants, mostly small and micro-businesses, outside it entirely. Industry Push The economics behind the push are straightforward. UPI processed 2,366 crore transactions worth nearly Rs 30 lakh crore in July alone and now accounts for 60-65 per cent of the volume flowing through payment aggregators. Under zero MDR, all of that volume generates no direct transaction revenue. This turns what should be a revenue line into a cost centre for the companies actually running the rail. Government incentive schemes meant to offset this haven't kept pace. The RuPay/BHIM incentive outlay fell from Rs 3,631 crore in FY24 to Rs 437 crore in FY26 before being revised up after industry pushback. Meanwhile, transaction volumes jumped from 17,220 crore in 2024 to 22,830 crore in 2025. Industry estimates put the annual cost of processing merchant transactions alone at Rs 4,000-5,000 crore. That cost is currently absorbed by banks and aggregators, with no mechanism to recover it. The Payments Council of India has backed the change on these grounds, arguing that sustained investment in infrastructure, cybersecurity and fraud prevention needs a funding mechanism to survive at this scale. The Key Question This is where the debate sharpens. The RBI Governor observed, just before the bill passed, that consumers ultimately bear such costs "in some way or another". This would not be a visible fee but through pricing that businesses adjust over time. That's a structurally different claim from "consumers won't be charged". Both can be true at once: no one sees a UPI fee on their app, while merchants who pay MDR gradually build it into prices, as most costs eventually are. A Local Circles survey of over 45,000 respondents across 322 districts found that 53 per cent would consider moving away from UPI for transactions above Rs 3,000 if MDR applied to large merchants. Of these, 27 per cent would move towards credit cards, 14 per cent towards debit cards, and 12 per cent towards cash or bank transfers. That doesn't mean half of India's UPI users are about to switch. It does mean payment behaviour often responds to the perception of a cost, not its actual, often negligible size. That is why regulators may need to be explicit about keeping any future MDR invisible at the point of sale, rather than allowing it to surface as a checkout surcharge. Who Gains Enterprise-focused payment aggregators and banks stand to benefit most directly, finally earning revenue on volume they currently process for free. Smaller technology-led players may also find it easier to compete in a market no longer weighted towards zero-revenue transactions. Notably, the big consumer apps PhonePe, Google Pay and Paytm aren't expected to be primary beneficiaries, since they already monetise elsewhere in their business. Any MDR revenue would likely flow to banks and aggregators rather than reshape how these apps make money. For Users Nothing changes today. Peer-to-peer transfers and the overwhelming majority of merchant payments stay free, and that isn't in dispute. What exists now is only the legal door for a narrowly scoped fee to be introduced later on a specific slice of larger merchant transactions. That decision sits with NPCI's committee, not this bill. The more useful thing to watch isn't whether UPI is "ending" as a free system. Every clarification so far says it isn't. The question is whether, once a fee is eventually finalised, its cost stays confined to the merchant side. Or does it find its way, gradually and indirectly, into the price of the things UPI is used to pay for? (The writer is an IT professional based in Thane. Views personal.)

Clever seat selection helped BJP to secure historic win

The party won 65 seats against Congress, 37 against NCP (SP) and 29 against Shiv Sena (UBT)

Clever seat selection

Mumbai: The BJP’s strategic seat sharing with the allies has proved beneficial for the party. An analysis of the Assembly election results show that the BJP has scored over its main rival, the Congress, in a big way because of the direct fights.


The analysis shows that BJP defeated all three constituents of the Maharashtra Vikas Aghadi (MVA) – Congress, Shiv Sena (UBT) and NCP (SP) – in the direct fights. This is attributed as one of the reasons for the BJP’s historic poll success.


The BJP contested 147 out of 288 seats. In 76 constituencies, it faced Congress. BJP secured victory in 65 seats and lost only 11 seats, making it a whopping 86 per cent of the total direct fights. This was followed by an even stronger performance against NCP (SP). Of the total 39 fights with Sharad Pawar’s party, BJP captured 37 seats making it 95 per cent of the total fights with NCP (SP). BJP and Shiv Sena (UBT) were head-to-head in 32 constituencies, of which BJP emerged victorious in 29 seats, making this 91 per cent of the total direct contests.


According to a BJP strategist the party had bargained hard with its allies, Shiv Sena and NCP to get the desired constituencies in the seat sharing formula. “We had studied to potential candidates of the MVA. That helped us in choosing the seats where we can register comfortable victories,” the strategist said.


BJP spokesperson Niranjan Shetty attributed the success to all the party workers who worked hard to boost development, infrastructure in the state. He gave credit to Deputy Chief Minister Devendra Fadnavis for his contribution to the party’s success.


Shetty pointed out that in 2019, Uddhav Thackeray had stalled all the “novel” and “legendary” projects that Fadnavis had started when he had taken over as CM, making it very easy for the people of Maharashtra to strike a comparison between both the leaders and the potential they had for serving the people. “Devendra Fadnavis gave up his post very easily for the larger good. There are many such examples like Venkaiah Naidu who was BJP National President and later worked as the Vice President of India because that was the need of the hour. We seldom care about our posts,” Shetty told The Perfect Voice.


Congress spokesperson Atul Londhe refused to call the election results as the people’s mandate. “This is not at all a Janata mandate. Despite Maharashtra struggling with so many basic social issues, how can BJP acquire such a huge mandate is the question. If a student copies and fails with just passing marks, it can go unnoticed, but if a student copies and bags the number one position, something is fishy. Why is the BJP scared of ballot papers?” he said.

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