UPI charges could hurt Digital India push, says DK Congress chief Padmaraj Poojary

Mangaluru: Dakshina Kannada District Congress Committee president Padmaraj R Poojary has criticised the move to introduce Merchant Discount Rate (MDR) on certain UPI transactions, saying it could undermine the objective of promoting digital payments.

Poojary said the government initially encouraged citizens to adopt UPI by providing a simple and largely free digital payment system, but the introduction of charges on specified transactions could create uncertainty among users and merchants.

Under the new framework announced by the Centre, UPI payments to merchants above ₹2,000 will attract an MDR of 0.4%, subject to specified exemptions and caps. Person-to-person UPI transactions will remain free, while payments to merchants up to ₹2,000 and transactions covered under the zero-MDR framework for small merchants will also remain free. The Centre said around 96% of merchant transactions would remain unaffected.

Poojary argued that although MDR is levied within the merchant payment ecosystem rather than directly on customers, merchants could face pressure from the additional cost. He expressed concern that some businesses may eventually seek to recover such costs through prices of goods and services.

He also raised concerns over the impact of the new framework on small traders and said uncertainty over charges and tax-related issues could encourage some businesses to favour cash transactions over digital payments.

The Centre, however, has said customers will not be charged MDR and that banks have been advised to ensure that merchants do not pass the MDR cost on to customers.

Poojary urged the government to reconsider measures that, in his view, could make digital transactions more costly and instead continue policies aimed at encouraging a transparent, cash-light economy.