The people of India should recall the GST experience once. ‘One nation – One tax’ the Modi government at the Centre assured people that it was meant to reduce the burden on the common man. But ultimately, the tax burden fell on the people themselves. Likewise, during demonetization too, although it was said that the objective was to curb the flow of funds to terrorism, the reality remained that terrorism and violence did not disappear completely.
Moreover, its impact led to consequences such as small businesses shutting down and workers losing employment. Now, the Centre appears to be following the same path with UPI as well. Presenting Digital India as the goal, it got people accustomed to saying “UPI is free – No burden on payments’. Now it has prepared the ground to impose a burden in the name of MDR charges. It is moving toward turning the digital payments system, expanded with people’s money and people’s usage, into a source of revenue for corporate payment companies.
A notification was recently issued imposing charges on Unified Payments Interface (UPI) transactions. This has opened the door to extensive discussions and debates among the public and political circles. This is natural because it concerns people’s everyday financial transactions. To understand the facts, one must examine the systematic efforts made by the government over the past decade to increase digital payments.
From October 15, 2026, the National Payments Corporation of India (NPCI) issued a notification stating that a 0.4 percent Merchant Discount Rate (MDR) charge would apply to P2M UPI purchase transactions between individuals above Rs.2,000. For transactions above Rs.75,000, this charge is capped at a maximum of Rs.300. The government clarified that person-to-person (P2P) payments, as well as merchant payments below Rs.2,000, will continue to remain free as before. What needs to be noted is that nearly 65 percent of all UPI transactions (by value) are above Rs.2,000 that is, the value of transactions falling within the scope of this charge is very large, and not as small as the argument that it ‘applies only to a few’ might suggest.
● What is the government’s argument?
According to the explanation given by the Ministry of Finance and Finance Minister Nirmala Sitharaman this is a charge imposed not on consumers, but only on merchants. MDR is not a tax that goes to the government or NPCI – it is an amount distributed among banks and payment service providers. Around 96 percent of payments, P2M transactions do not come under this charge. The government argues that for the UPI system to remain sustainable in the long term, funds are needed for its infrastructure and security, and therefore this charge is necessary.
● Is this argument factual?
What the government says appears technically true – it is the merchant who pays the charge. But think about how business works in the real world. No merchant will reduce their profit. Every additional charge and every expense incurred will be added to the price, and ultimately collected from the consumer. That means, although the statement ‘there is no direct charge on the customer’ is true on paper, in practice it is merely an illusion. The many purchases and expenses we make in our daily lives are examples of this. The common person will have to spend their own money and indirectly pay charges to digital payment companies – what else is this but exploitation?
● 0.4 percent now, how much in the future?
Another key question – will these charges stop here? Once the ‘zero-MDR’ policy is abolished, these charges could be increased in the future, and their scope could be expanded (such as reducing the Rs.2,000 limit) at any time tomorrow. The very government that says today ‘there is no charge on 96 percent of transactions’, who will stop it if it expands that scope tomorrow? If people do not question this first step itself, it will become difficult to stop the burden of tomorrow.
● Who benefits from these charges?
Of the transactions taking place in the UPI market, American companies Walmart – owned PhonePe (fifty percent) and Google Pay (33 percent) together have an 83 percent share. If the new MDR policy comes into effect, the largest share of these charges will go into the accounts of these two foreign companies. Public sector bank apps do not even have a one percent share in this market -that means, whoever built and runs this system will also be the ones enjoying its benefits.
● The story that began with the USAID agreement.
To understand this entire affair, one has to go back ten years. In September 2015, the Government of India entered into an agreement with the United States Agency for International Development (USAID), an American organization. Along with several US government departments, many tech companies and NGOs such as Microsoft, Mastercard, the Bill Gates Foundation, Google and Walmart are partners in that organization.
The objective was to expand their business interests rather than development. Among other things, at that time more than ninety percent of transactions in India were conducted in cash. The essence of that agreement was to convert this cash system into digital. But without telling the public this actual matter, in November 2016 demonetization was announced with patriotic slogans – the objectives stated were to uncover black money, eliminate counterfeit currency, and cripple the financial roots of terrorism. The reality is that none of the announced objectives of demonetization were fulfilled.
● The government is refusing to allow discussion on these issues either in Parliament or outside.
But surprisingly, digital banking and UPI transactions increased unexpectedly – transactions that were only three lakh per month in 2016 reached 2,366 crore by 2026. It is reported that the foreign companies that became central to this system have now pressured the government to impose charges on their transactions. As a result, the law was amended, followed immediately by this notification. All this did not happen by chance – it was a process implemented in stages according to a plan. It is unjust that ordinary people, while using their own money themselves, should have to pay thousands of crores of rupees in charges to American companies on those payments. The government’s argument that ‘there is no burden on the customer’ is merely an attempt to conceal the reality.
Everyone should closely observe this decision, question it, oppose it. The government should immediately withdraw this MDR notification. We are seeing how the decisions being taken by Donald Trump since he was elected President of the United States, disregarding international laws, are affecting the global economy. All the decisions being taken under the slogan Make America Great Again (MAGA) are aimed at generating profits for the American corporate sector. The US warmongering in Palestine, Iran and Venezuela is intended to gain control over those countries’ natural resources. The United States has announced a hundred percent tariff on our country’s imports on the pretext that we are trading with Russia. Instead of preventing these policies and protecting our country’s foreign exports, everyone should oppose imposing charges on digital transactions in a way that benefits them even more.