Entrepreneur and BharatPe co-founder Ashneer Grover has questioned the proposed merchant charge on UPI transactions above Rs 2,000, arguing that the cost could ultimately be passed on to consumers.
Grover made the remarks in a television interview while discussing the government’s clarification that the new merchant fee would not directly affect consumers and that person-to-person UPI transactions would remain free, regardless of the transaction amount.
Grover Questions UPI Merchant Charge
In an interview with Times Now, Grover was asked about the argument that merchants who can afford the fee should bear the cost.
Questioning that reasoning, he said, “Then call it tax. Why are you calling it a ‘charge’, ‘MDR’, or claiming that it won’t affect the customer?”
Grover also compared the issue with taxation on petrol, arguing that costs imposed elsewhere in the supply chain can eventually be reflected in the final price paid by consumers.
“End of day who pays? Whether it is tax or any other charge, the consumer pays,” he said.
What Is The UPI Merchant Fee?
Merchant Discount Rate, or MDR, is a charge within the digital payments ecosystem associated with processing certain transactions.
According to the government’s clarification cited in the report, the proposed charge is not a tax and is not money collected by the government or the National Payments Corporation of India (NPCI).
The new framework applies to merchant transactions above Rs 2,000, while person-to-person UPI payments remain free.
Grover Raises Questions Over UPI Economics
In a subsequent post on X, Grover cited figures relating to the Reserve Bank of India’s surplus, bank profits and NPCI’s pre-tax surplus while questioning the need for the merchant fee.
He claimed that the RBI’s surplus transferred to the government stood at Rs 2.87 lakh crore, while total listed bank profits were Rs 4.11 lakh crore. He also cited an NPCI pre-tax surplus of Rs 1,888 crore.
Based on these figures, Grover questioned who was bearing losses on UPI and what subsidy the government was paying for the payment system.
He also referred to the costs associated with operating ATMs and cash logistics while arguing in favour of greater use of digital payments.
Will Consumers Have To Pay More?
The government has said the merchant charge does not apply to consumers directly. It also clarified that person-to-person UPI transactions of any amount will continue to remain free.
The government has further said that around 96% of merchant transactions will remain unaffected because they are either below the Rs 2,000 threshold or covered by the zero-MDR framework for small merchants.
Grover, however, has disputed the argument that consumers will necessarily remain unaffected, saying merchants could potentially factor additional costs into the prices of goods or services.
When Does The New Rule Take Effect?
The mandate for the merchant fee on applicable UPI transactions above Rs 2,000 is scheduled to take effect from October 15.
The debate centres on whether the charge will remain a cost absorbed within the merchant and payment ecosystem or whether some businesses could eventually pass the cost on to customers.
While the government has maintained that consumers will not be directly charged under the framework, Grover has argued that the economic impact could ultimately reach consumers through other channels.
